| Money Market | Capital Market |
| Definition | It is the part of the financial market where lending and borrowing takes place for a short term upto one year. | Capital market is part of the financial market where lending and borrowing takes place for medium-term and long-term. |
| Types of instruments involved | Treasury bills, Call money, Commercial papers, Commercial bills. | Equity shares, debentures, bonds etc. |
| Institutions involved/Type of Investors | Commercial Banks, Central Banks, Chit Funds etc | Stock brokers,underwriters,mutual funds,individual investors,financial institutions |
| Regulated By | RBI | SEBI |
| Nature of Market | Informal | Formal |
| Liquid of the market | They are liquid. | They are relatively less liquid. |
| Maturity Period | Generally upto one year | These instruments have longer periods with maturity more than one year. |
| Risk factor | Since the market is liquid and the maturity is less than one year, risk involved is low. | Due to less liquid nature and long maturity, the risk is comparatively high |
| Purpose | The market fulfills the short term credit needs of the business | The market fulfills long term credit needs of the business |
| Functional Merit | The money market increases the liquidity of funds in the economy. | The capital market stabilizes the economy due to long term savings. |
| Return on Investment | The returns in the money market are usually low. | The returns in capital markets are high because of higher duration. |
