Distinguish between
1) Money market and Capital market.
Basic for comparison | Money market | Capital market |
Meaning | A segment of the financial market where lending and borrowing of short term securities are done. | A section of the financial market where long term securities are issued and traded. |
Nature of Market | Money markets are informal in nature | Capital markets are formal in nature |
Financial instruments | Treasury Bills, Commercial Papers, Certificate of Deposit, Trade Credit, etc. | Shares, Debentures, Bonds, Retained Earnings, Asset Securitization, Euro Issues, etc. |
Risk Factor | Money markets have a low risk | Capital markets have more risk as compared to money markets |
Return on Investment | ROI is usually low in money market | ROI is comparatively high in the capital market |
Liquidity | Money markets are highly liquid | Capital markets are comparatively less liquid |
2) Demand deposit and Time deposit.
Basic for comparison | Demand deposit | Time deposit |
Time Period | There is no fixed time period involved in the case of a demand deposit. | Time deposits are deposited in the bank for a fixed period of time (usually 1 year to 5 years) |
Example | Saving accounts and current accounts are examples of demand deposits. | Fixed or term deposit is an example of time deposits |
Rate of Interest | In the case of saving and current accounts it is lower (which is around 4 to 6 percent). | The rate of interest offered by the banks on time deposit is higher around 7 to 9 percent |
Facilities | In case of demand deposits, one needs all facilities like ATM, credit card, the online banking as these accounts are meant for withdrawal of funds as and when required by the account holder. | In case of time deposit, one does not need facilities like ATM, credit card, online banking as funds are tied for a specific period |
3) Organized sector and Unorganized sector of money market.
Organized sector | Unorganized sector |
In the organized market, the employment terms are fixed and regular. | In the unorganized market, the workers are paid on a daily basis. |
The workers in the organized market get assured work and some basic facilities. | The workers in the unorganized market do not get assured work and no basic facilities such as medical policies are not provided to them. |
The organized market is the one that is combined with the relevant administration or government and comprehends its rules and regulation. | The unorganized market is not associated with the government and therefore, no rules are expected to be followed. |