A bank is a financial institution that accepts deposits from the public and

creates credit. Lending activities can be performed either directly or

indirectly through capital markets. Due to their importance in the financial
stability of a country, banks are highly regulated in most countries. Most
nations have institutionalized a system known as fractional reserve banking
under which banks hold liquid assets equal to only a portion of their current
liabilities. In addition to other regulations intended to ensure liquidity, banks
are generally subject to minimum capital requirements based on an
international set of capital standards, known as the Basel Accords.

Banking in its modern sense evolved in the fourteenth century in the

prosperous cities of Renaissance Italy but in many ways was a continuation
of ideas and concepts of credit and lending that had their roots in the ancient
world. In the history of banking, a number of banking dynasties – notably,
the Medicis, the Fuggers, the Welsers, the Berenbergs, and the Rothschilds
– have played a central role over many centuries. The oldest existing retail
bank is Banca Monte deiPaschi di Siena, while the oldest existing merchant
bank is Berenberg Bank.

Loan is a method of lending under which bank gives credit to a borrower for
a fixed period and for a specific purpose. Many a time a borrower needs funds
for fixed assets or nonrepetitive type of activities and thus, seeks money from
the bank which is withdrawn in one lump sum. If the borrower needs again
funds for such purpose, he has to negotiate with the bank of a loan again or
to get his existing loan renewed. The loan amount is normally repaid in
installments. Loans may be short term, medium term or long term. Long
Term loans are generally taken for meeting the capital investment
requirements. Such loans are called “Term
Loans”. When a loan is meant for meeting both fixed capital and working
capital
requirements of borrower, it is called a composite loan.

A loan is the purchase of the present use of money with the promise to repay
the amount in the future according to a pre-arranged schedule and at a
specified rate of interest. Loan contracts formally spell 1 out the terms and
obligations between the lender and borrower.

Loans are by far the most common type of debt financing used by small
businesses.

Loans can be classified as long-term (with a maturity longer than one year),
short-term (with a maturity shorter than two years), or a credit line (for more
immediate borrowing needs). They can be endorsed by cosigners, guaranteed
by the government.

One of the key measures for economic development of a country is providing

education accessible to a large number of people. The state alone cannot
provide higher education to the masses .The education policies of 1986 and
1992 of the Government of India signal private participation in higher
education.

Self financing colleges and Deemed Universities were permitted to operate

in the country. Tuition fee in the self financing colleges and Deemed
Universities were not affordable for many people. Some people availed bank
loans to study in them.
This model framework for educational loans proposed loans up to INR 0.4
million without any security other than the personal security of the borrower.

The repayment of the loan with interest can be started one year after the end
of the course or within six months after getting the jobs whichever is earlier.
The private sector and cooperative banks too joined the fray.