Illustrate the difference between 'money market' and 'capital market'.

The 'money market' and 'capital market' are two distinct segments of the financial market, differentiated primarily by the maturity period of the financial instruments traded and the purpose of financing. Distinction between Money Market and Capital Market: Basis of Distinction Money Market Capital Market 1. Purpose of Lending/Borrowing Lending or borrowing of short-term funds, typically for one year or below. Lending or borrowing of long-term funds, typically for more than one year. 2. Instruments Traded Call Money, Treasury Bills, Commercial Bills, Commercial Papers, Certificates of Deposit, Repos. Stocks (Equity Shares), Debentures, Bonds, Corporate Deposits, Government Securities. 3. Major Participants Commercial banks, acceptance houses, non-banking financial institutions, bill brokers, central bank. Stock exchanges, commercial banks, insurance companies, mutual funds, mortgage banks, investment banks. 4. Capital Provided For Provides working capital requirements of businesses. Provides fixed capital for long-term investments like buying land, machinery, expansion projects. 5. Risk and Liquidity Generally low risk and high liquidity due to short maturity and active trading. Generally high risk and low liquidity compared to money market instruments due to long maturity and price volatility. 6. Central Bank Link The central bank (RBI in India) has a close and direct link, actively regulating and influencing it through monetary policy. The central bank has an indirect link, primarily through its impact on interest rates and overall economic stability. 7. Regulation Commercial banks and other participants are closely regulated by the central bank. Institutions are not as tightly regulated by the central bank as money market participants; instead, they are regulated by bodies like SEBI.