A Financial Market can be defined as the market in which financial assets are created or transferred. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend. Efficiency of financial system largely depends upon the quality and variety of financial services provided by financial intermediaries. The term financial services can be defined as “activities benefits and satisfaction connected with sale of money that offers to users and customers, financial related value.” Let us classify the financial market as follows:
1) Money Market : The money market is a wholesale debt market for low-risk, highly-liquid, short-term instrument. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions. Money market is that market where short-term credit is supplied and demanded.
2) Capital Market : The capital market is designed to finance the long-term investments. The transactions taking place in this market will be for periods over a year. This is the other part of financial market where long term credit is bought and sold, in other words, where capital is bought and sold.
3) Forex Market : The Forex market deals with the multi currency requirements, which are met by the I exchange of currencies. Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most developed and integrated market across the globe.
4) Credit Market : Credit market is a place where banks, Financial Institutions and NBFCs provide short, medium and long-term loans to corporate and individuals.
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