The government on Thursday clarified that it is not resorting to partial monetisation of its deficit. In a formal clarification sent by the finance ministry, the government clarified that Open Market Operations (OMO) of the Reserve Bank are different from monetisation.

OMO of RBI are a regular tool for effective liquidity management. By way of these the RBI can either buy or sell Government securities in the secondary market as part of its OMO. In other words, these are entirely secondary market operations. The amount of OMO and the decision to buy or sell government securities in the secondary market are determined by the prevailing liquidity conditions in the market.

At present, notwithstanding the 6.8 per cent fiscal deficit projected in BE 2009-10, the Government does not propose to invoke the above provisions of the FRBM Act for facilitating RBI participation in the primary market for government securities, an official release stated.