7 Difference Between Money and Capital Markets

Money and capital markets are the types of the financial market. Market is the place where we sell and buy the things which we need the most. So, money and capital markets are also the markets from which people generate capital by selling and buying financial instruments. Money market is a place where people raise funds for the short term through financial instruments. In this companies fulfill needs of the money which is needed for the short term. Money market instruments like repurchase agreement, commercial paper and certificate of deposit. While the capital market is the place where companies raise funds for the long term through the financial instruments. In this people generate money through stock and share.

Both these markets are very important for the growth and development of the company. So it’s very important to discuss the difference between Money and capital markets. In this article we will clear all the questions and doubt money and capital markets. We will also discuss all other related aspects with the money and capital markets.

Money Market vs Capital Market

Sr. No.	Money Market	Capital Market
1	Market in which financial instruments are sold or bought to borrow fund for the short term.	Capital market is the market where financial documents are sold and bought to raise the funds for the long term.
2	Treasury bills, repurchase agreement, commercial paper and certificate of deposit main financial instruments.	Main instruments are equity, bonds, shares, debentures.
3	Investors in the money market are commercial banks, non – financial banks and chit funds	Capital market investors are small firms, companies as well as the individuals.
4	More liquid	Less liquid.
5	More risk	Less risk.
6	Less Return	More Returns.
7	RBI keeps eyes in it.	SEBI keeps eyes on it.

What is the money market?

Money market is mostly used by the big firms and banks to generate the money for a short time period through the financial instrument. These financial instruments are repurchasing agreement, commercial paper and certificate of deposit. Companies and banks borrow money against these instruments. RBI controls the money market. In the money market mostly inter banking is done in which banks credit money against the financial instruments.

With the help of money market account companies invest in the money market. The interest on the money market account is more than the savings account. The maturity of the money market investment is a year and less than a year.

What is Capital market

This is the market in which big or small as well as individuals invest or generate money for the long term through the financial instruments. In these financial instruments are equity, bonds, commercial papers and shares etc. Main investors in the capital are banks, brokers, insurance companies and shares of the company. Maturity of the credits and debts of the capital market is more than a year.

Capital market is controlled by the SEBI. There is high risk in the capital market, in the capital market the returns are higher than the money market. There are two types of the capital market. Capital market plays a very important role in the growth of the nation, because it provides the scope for mobilizing funds. Capital market is less liquid.

Main differencee between money and capital markets

1. Money is a market in which financial instruments are sold or bought to generate funds for the short term. While the capital market is the market where financial documents are sold and bought to generate the money for the long term.
2. Main financial instruments in money market treasury bills, repurchase agreement, commercial paper and certificate of deposit. And in the capital market main instruments are equity, bonds, shares, debentures.
3. Investors in the money market are commercial banks, non – financial banks and chit funds. While in the capital market investors are small firms, companies as well as the individuals. Individuals also invest in the capital market because shares come in the capital market.
4. Money market is more liquid. Capital market is less liquid.
5. There is more risk in the capital market. While there is less risk in the money market.
6. Maturity of the money market is less than year. While in the capital market maturity is more than a year.
7. Return in the capital market is more than the capital market.
8. SEBI keeps its eyes on the capital market. While RBI keeps eyes on the money market.

Conclusion

Both money and capital markets main purpose is to provide Money to the company and firms for a short time and for a long time. These markets lend money to companies. Capital market is very important for the growth of the country. Bothe markets give good returns which leads to more investments.

This is all about the money and capital markets. We hope this will clear your doubt. If you have any confusion or doubt please feel free to comment on us. For more topics like this please visit our website.