These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed the most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this , there is another market in which unsecured and short-term debt instruments are actively traded every day. These markets together help the savers and inventors in directing the available funds into their most productive investment opportunity.
(a) Name the function being performed by the market in the above case.
(b) Name the market segment other than the capital market segment in which unsecured and short-term debt instruments are traded. Also, give any three points of difference between the two.

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Solution

(a) Mobilisation of savings and channeling them into the most productive uses/Allocative function.
(b) Money market: Difference between Capital Market and Money Market:
Basis Money Market Capital Market
(i) Participants
The participants are RBI, financial institutions, banks, corporates,
The participants are financial institutions, banks, corporates; foreign investors and retail investors.
(ii) Instruments

Instruments traded are treasury bill, commercial paper, certificates of deposit, call money and commercial bill, Instruments traded are shares, debentures and bonds.
(iii) Safety
Money market securities are comparatively safer.
Capital market securities are riskier than money market instruments.
(iv) Expected return
Money market securities yield comparatively less return
Generally yield a higher return than money market instruments
(v) Investment outlay
Money market securities have a large investment outlay
Capital market securities have small investment outlay
(vi) Duration
Money market deals in short term securities whose period of maturity is upto one year
Capital market deals in medium term and long term securities with period of maturity of more than one year.
(vii) Liquidity
Money market securities are comparatively more liquid
Capital market securities are comparatively less liquid.

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These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this there is another market in which unsecured and short-term debt instruments are actively traded everyday. These markets together help the savers and investors in directing the available funds into their most productive investment opportunity.

(a) Name the function being performed by the market in the above case.

(b) Also, explain briefly three other functions performed by this market.

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Basis	Money Market	Capital Market
(i) Participants	The participants are RBI, financial institutions, banks, corporates,	The participants are financial institutions, banks, corporates; foreign investors and retail investors.
(ii) Instruments	Instruments traded are treasury bill, commercial paper, certificates of deposit, call money and commercial bill,	Instruments traded are shares, debentures and bonds.
(iii) Safety	Money market securities are comparatively safer.	Capital market securities are riskier than money market instruments.
(iv) Expected return	Money market securities yield comparatively less return	Generally yield a higher return than money market instruments
(v) Investment outlay	Money market securities have a large investment outlay	Capital market securities have small investment outlay
(vi) Duration	Money market deals in short term securities whose period of maturity is upto one year	Capital market deals in medium term and long term securities with period of maturity of more than one year.
(vii) Liquidity	Money market securities are comparatively more liquid	Capital market securities are comparatively less liquid.