What are all the things I should know about open-market operations practiced as a monetary policy instrument by the Reserve Bank of India?

An open market operation allows the central bank to change money supply in the economy and in turn, affects the rate of interest. For instance, suppose the central bank buys the government securities or bonds from the market through open market operations and in return gives money to the bondholders. This money becomes a part of cash or deposits with a commercial bank and therefore, increases the amount of money in the economy. Now, as money supply increases with the given money demand the rate of interest goes down.

On the other hand, if central bank wants to reduce the money supply in the economy in order to increase the rate of interest it sells the government securities or bonds to the banks and in return collects money from them thus, contracting the money supply in the economy by restricting the ability of banks to lend loans.