Difference between capital market and money market and what are the main institution or sources of capital market

MONEY MARKET :- In a strict sense we can say that money market is that market which provides loan for short term . It mainly duster the activities of the discount houses, commercial banks and the central bank of the country. In India or Pakistan like State bank, Commercial Banks, Co-operative banks and saving banks provide the short term loans. So money market in India or Pakistan mainly consists upon these institutions.

CAPITAL MARKET :- Capital market refers to a market where financial institutions mobilize the savings of the people and advance for long term increase the new capital in the country. The financial institution invest the funds in those sectors where the rate of profit is high ans secured. The money market and capital both are controlled by the central bank of the country.
In Pakistan capital market consists upon the following institutions : 1) Stock exchange. 2) NIT. 3) ICP. 4) Picic. 5) Insurance Companies. 6) NDFC. 7) Equity Participation Fund.

MAIN PROBLEMS OF MONEY MARKET AND CAPITAL MARKET

No doubt with the passage of time our financial institutions are developed . Our banking and non-banking institutions are mobilizing the savings of the people in urban and rural areas. These are also providing loans to trade inside and outside the country. Credit requirement of trade and industry are adequately met by these institutions. The State Bank is also controlling these institutions very well. In spite of all these achievements and efforts, there are many problems of capital and money market, we discuss them in brief :

1. LACK OF CO-ORDINATION :- There is a lack of co-ordination between the various financial institutions. they adopt different policies and due to this lending and borrowing becomes difficult. There is overlapping and delays in creating the needs of industrial and trade sector.

2. BUREAUCRATIC CONTROL :- The economic policies are framed by the bureaucrats instead of technocrats, so they creates many problems. Many financial institutions are controlled by the bureaucrats and they have no technical skill, so they lack decision making.

3. MIGRATION OF SKILLED PERSONS :- The professional and skilled persons in the financial institutions are leaving the country and getting employment in Middle East for higher wages. The large scale migration of skilled person has created a gap of talented persons in the financial institutions.

4. LACK OF DISCIPLINE :- In the financial institutions unions are playing very effective role. So due to unions there is inefficiency and indiscipline in the financial institutions.

5. WASTEFUL EXPENDITURE :- There is a wasteful expenditure almost in all the financial institutions. There is over staffing in these institutions and due to this rate of output is low. A lot of money is wasted on advertisement and decoration.

6. RURAL AREAS IGNORED :- The branches of the financial institutions are not opened in the rural areas to collect the savings of the villages. So, some new types of saving instruments should be introduced to attract the farmers.

7. CARELESSNESS IN ADVANCING LOANS :- In advancing loans financing institutions compete with each other to show better performance. Some times they lend the money to those people who can not repay. So before advancing loans they must be careful in checking the character and financial condition of the borrower.Before advancing they must be satisfied about the project for which they are lending.

8. POLITICAL PRESSURE :- Political leaders in India or Pakistan are also misusing the credit. Some times the financial institutions advance the loan on political grounds. So this practice is not suitable for the money market. In India and Pakistan number of political leaders have been exempted from the loan which was advanced to them by the commercial banks. So these steps are not favorable for the nation and for the financial institutions.

9. REPAYMENT PROBLEM :- The complaints about of default in loan repayment both by the public and private sector is increasing day by day. The government should take effective steps for the recovery of loan.

10. POOR QUALITY OF MANPOWER :- Poor quality of manpower is employed in the financial institutions which causes low production. There should be an arrangement of training and higher studies. The talented people should be awarded.

11. CORRUPTION :- In the financial institutions bribery and mal practices are common. Government should make strict rules to eradicate corruption.

12. PUBLIC IS NOT BANK MINDED :- In India and Pakistan literacy rate is very low and people are not bank minded, due to this rate of lending and borrowing is very low in the country.

13. LACK OF INFORMATION :- People know nothing about the financial institution. Financial institutions should publish the publication about their performance. They may also use the press and media for this purpose.
Due to above reasons money market and capital market is not well organized in India and Pakistan.