Discussion of loans given by Banks
A Bank gives a
loan to an individual or a group of persons or an organization on mutual
agreements of Terms of Credit.
A loan is the
money or goods that the Bank supplies to the borrower for a pre-determined
duration. The loans given by Banks are very crucial in an economic system of
any country. They play an important role
in the development of the country. A
bank gives loans for earning profit as well as to fulfil its obligation of service to
the society. A bank gives loans on the
advice of a state government or central government to farmers, self help groups
In India the
public banks and private banks are bound by the rules established by the
Reserve Bank of India. RBI monitors the
loaning activities through regular audits of the banks. Banks have to obey a maximum ratio for the
loans they can give, to the deposit reserves they have. The reserve bank sees that the interest rates
are reasonable and are fitting to the current inflation and other development indices. If the interest on loans is very high or very
less then it will be difficult for the borrower to pay back or for the bank to
survive. Nationalized banks offer loans
at lower rates compared to the private banks.
A bank offers
loans to individuals (personal loans) money for some days or months or years with repayment terms
being periodical (like monthly, quarterly or yearly). Before issuing a loan, the bank may take assurances
or guarantee from a third person or body for the recovery of the loan. A bank gives a loan after procuring some legal
documents (like house sale deed or land ownership documents) etc. The bank also
has a limit on the amount of loan against the value of the ownership documents
submitted. Such loans are called
A bank may be
offering credit card services. In these
services an account holder is allowed to spend up to a limit in shopping etc
using the credit card. The bank pays the
trader. The money is repayable by the
card holder in 4 weeks or so without an interest and with interest
A bank may
give an educational loan to students for a long duration, for the purpose of
higher studies. The bank may take a guarantee
and some documents from the student. The
student may have to repay the money periodically after some years after getting
A bank may
loan is given at a higher rate of interest to a borrower than the interest a
bank pays to a depositor. This is how
the bank earns its profit and pays for its expenses.
A bank offers
loans at a low interest on the fixed or term deposits that an account holder
has. The amount of loan and the duration
depend on the deposited amount and its duration.
A bank gives
loans to poor farmers on advice and assurance of government towards expenses
for cultivation every year. Nowadays
women and self help groups are given loans at reduced rates for their
development. This is done as a service
towards the society.
A bank gives a
housing loan to a person so that a person can buy a house or apartment. The bank holds the legal documents until the
end of the duration of repayment schedule.
The borrower can occupy the property.
A bank offers a
loan for purchase of a vehicle like a car or van or a truck for personal or
Often when borrowers fail to repay as per
the terms agreed initially, the bank takes control of the properties and sells
them to recover its loan amount. Banks are rated
also for the credit system that they have and the services they offer. The banks provide a loan interest calculator
and other terms on web sites to be transparent.