Capital market deals
with medium term and long term funds. It refers to all facilities and the
institutional arrangements for borrowing and lending term funds (medium term
and long term). The demand for long term funds comes from private
business
corporations, public corporations and the government. The supply of funds comes
largely from individual and institutional investors, banks and special
industrial financial institutions and Government.
Capital market is
classified in two ways:
1. Gild – Edged
Market refers to the market for government and semi-government securities,
which carry fixed rates of interest. RBI plays an important role in this
market.
2. Industrial
Securities Market: It deals with equities and debentures in which shares and
debentures of existing companies are traded and shares and debentures of new
companies are bought and sold.
3. Development
Financial Institutions (DFIs): Development financial institutions were set up
to meet the medium and longterm requirements of industry, trade and
agriculture. These are IFCI, ICICI, IDBI, SIDBI, IRBI, UTI, LIC, GIC etc. All
These institutions have been called Public Sector Financial Institutions.
4. Financial
intermediaries: Financial Intermediaries include merchant banks, Mutual Fund,
Leasing companies etc. they help in mobilizing savings and supplying funds to
capital market.
The Second way in
which capital market is classified is as follows :-
1. Primary market:
Primary market is the new issue market of shares, preference shares and
debentures of non-government public limited companies and issue of public
sector bonds.
2. Secondary market:
This refers to old or already issued securities. It is composed of industrial
security market or stock exchange market and gilt-edged market.