The correct answer is The sale and purchase of government securities and treasury bills by RBI or the central bank of the country.

• Recently, The Reserve Bank of India (RBI) has said it would conduct an Open Market Operation (OMO) purchase of State Developments Loans.
• Open market operations (OMO) 
  • Open market operations are the sale and purchase of government securities and treasury bills by RBI or the central bank of the country.
    • These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively. Hence, Statement 1 is correct.
    • It is one of the quantitative monetary policy tools. 
• There are several direct and indirect instruments RBI used for implementing monetary policy. (Asked in UPSC prelims)
  • Repo Rate:
    • The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF). Hence, Statement 2 is not correct.
  • Reverse Repo Rate:
    • The (fixed) interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF. Hence, Statement 3 is not correct.
  • Bank Rate:
    • It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers. Hence, Statement 4 is not correct.
    • This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes.