In the context of Indian monetary policy, the term 'Open Market Operations' (OMOs) specifically refers to which of the following activities carried out by the Reserve Bank of India (RBI)?

Introduction / Context:
Open Market Operations (OMOs) are one of the most important tools of monetary policy used by the Reserve Bank of India (RBI) to control liquidity and influence interest rates in the economy. Many competitive examinations test whether candidates can correctly identify what OMOs actually involve, as opposed to other common banking activities. This question focuses on the precise meaning of the term in the Indian monetary system.

Given Data / Assumptions:

• The context is Indian monetary policy and the role of the RBI.
• We are asked to define what 'Open Market Operations' refer to.
• The options mention borrowing by banks, lending by banks, purchase and sale of government securities, deposit mobilisation, and currency issuance.
• We assume the standard textbook definition of OMOs as used by central banks worldwide.

Concept / Approach:
Open Market Operations are the buying and selling of government securities in the open market by a central bank, such as the RBI. When the RBI buys government securities, it injects liquidity into the banking system; when it sells government securities, it absorbs liquidity. This tool helps the RBI manage short term interest rates, control money supply, and stabilise financial markets. Other activities like borrowing by banks from the RBI, deposit mobilisation, and commercial lending are important but are not technically called OMOs.

Step-by-Step Solution:
Step 1: Recall that the key idea behind OMOs is the central bank using government securities as an instrument to add or drain liquidity.Step 2: When the RBI purchases government securities from banks or the public, it credits their accounts, increasing the reserves and liquidity in the banking system.Step 3: When the RBI sells government securities, buyers pay for them, which reduces their bank balances and thereby reduces liquidity.Step 4: This process of buying and selling government securities in the open market is precisely what is meant by Open Market Operations.Step 5: Borrowings by scheduled banks from the RBI are part of the lender-of-last-resort and refinance facilities, not OMOs.Step 6: Deposit mobilisation, commercial lending, and issuance of new currency notes are other banking functions and do not define OMOs.Step 7: Therefore, the correct option is the purchase and sale of government securities by the RBI in the open market.

Verification / Alternative check:
Standard macroeconomics texts and RBI publications describe OMOs as a key monetary policy tool. They explain that OMOs help maintain desired liquidity conditions and transmit policy rate changes to the broader financial system. For example, during periods of excess liquidity, the RBI may sell government securities under OMOs to absorb surplus funds. Conversely, in times of tight liquidity, it may buy securities to inject funds. None of these descriptions refer to deposit mobilisation or direct commercial lending, which confirms the correct definition.

Why Other Options Are Wrong:
Borrowings by scheduled banks from the RBI: These are part of refinance facilities and the liquidity adjustment facility but are not called OMOs.

Lending by commercial banks directly to industry: This is normal credit creation by banks and is unrelated to the RBI open market dealings.

Deposit mobilisation by commercial banks from the public: This is a liability raising activity of banks, not a central bank operation in the securities market.

Issue of new currency notes by the RBI: Although the RBI issues currency, this is separate from OMOs, which relate specifically to government securities transactions.

Common Pitfalls:
Candidates sometimes confuse any open market activity of banks with Open Market Operations. The key is to remember that OMOs are central bank operations involving government securities, not everyday banking actions like accepting deposits or giving loans. Focusing on the phrase purchase and sale of government securities by the RBI helps you recall the correct definition quickly in exam situations.

Final Answer:
Open Market Operations refer to the purchase and sale of government securities by the RBI in the open market.