Role Of Capital Markets In Financial System

Shafaq, LLM, Chandigarh University

I. ABSTRACT

Capital market is a market for long term funds. It refers to all facilities and institutional arrangements for borrowings and lending of medium term and long-term fund. It deals not capital goods but concerned with rising of money capital for investment. In the capital market the supply of funds largely from individual savings, corporate savings, banks, insurance companies, specialized financing agencies and Government. The demand for long term capital comes mainly from private sector industries and Government. Capital market deals with all 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 consists of Primary Market and Secondary Market. Stock Exchange also plays important role in capital market. Due to speedy economic growth India still faces massive income inequalities, high unemployment, illiteracy and poverty. So, there is a need to initiate some reforms for strengthening capital market. The present article aims at theoretical focusing the role and challenges of Indian capital market in current scenario and also suggests some suggestions for making capital market effective. This article is based on secondary sources of information from Publications of various Institutes, published articles, journals online & printed, web sites, books. The information is collected from libraries and websites. The literature is cross checked and validated to gives the latest information.

Keywords: Capital Market; Role of Capital Market; Investment; Economic Development; Challenges; Market Reforms.