Money markets represent shortterm lending while capital markets allow investors to trade in stocks and bonds. In a well-functioning financial system, transaction costs are low, analysts can value savings and investments, and scarce capital resources are used well.Description and Objectives. Public organizations borrow money to finance their capital investments and to pursue. The document discusses money markets and capital markets, explaining that money markets deal in short-term financial instruments of up to one year. CMR serves as a benchmark for monetary policy operations. Eg- if the interest rate is high, RBI will buy securities. The money market deals in short-term debt instruments while the capital market facilitates long-term debt and equity raising. This study was prepared under the direction of Alessandro Leipold, Advisor in the Exchange and Trade Relations Department of the International Monetary.