Loan system The English word credit, derived from the Latin word ‘card’ (Sanskrit-Latin card), means debt in economics, but it means to trust in one person (organization) over another.
Loan in the form of loan or borrowing is the payment of money or goods based on the belief that the price will be refunded later. (What is a bank loan)
Most loans are, in fact, financial loans so that the creditor first lends a certain amount of money to the debtor and later repays the loan with interest. Again the term credit refers to the debt and the borrower’s ability to repay the loan.
The history of debt evolution is long. In the distant past, at the beginning of the farming and exchange economy, surplus farmers supplied cereals and seeds to deficit farmers. Later, they recovered the total dues by increasing the amount paid during the harvest season.
Since the introduction of monetary and economic transactions in goods and services, the system of buying and selling loans has been developing rapidly.
Banks and various types of non-banking financial institutions have been developing lending systems to meet the need for money to meet other requirements, in addition to cash loans or trade loans. However, those who have a unique role in developing the credit system are the local moneylenders, goldsmiths, and merchants.
Types of Loans
Loans come in many different forms. Several factors can differentiate the costs associated with them, along with their contractual terms.
What is a bank loan:-
Bank loan refers to the total loan disbursed by the scheduled banks of the country. It has two parts- a) advance and b) discounted bills. At present (June 2010), there are four state-owned, four specialized, 30 private commercial banks, and nine foreign banks.
According to the latest data, the combined debt of scheduled banks stood at Rs 2,49,003.36 crore at the end of December 2009, of which more than 90 per cent was disbursed in urban areas.
In the last ten years, the growth of bank loans has averaged more than 31 per cent on an annual basis. In the previous decade, the average growth rate of this loan was 16.0 per cent.
In Mughal Bengal, moneylenders were the primary source of agricultural credit. The Mahajani system is very ancient; it existed even in the Vedic age.
According to Risala-i-Jirat, written in Persian immediately before the British rule in Bengal, peasants often became indebted due to the non-payment of rent. They occasionally had to make up for the loss of drought, cover extra expenses for family functions, or settle disputes.
Someone had to take a loan from someone. In addition to moneylenders, local people in business and wealthy neighbours acted as sources of credit in these situations. British and local traders used to give production loans to farmers in Bengal through the practice of Dadlani.
The importance of internal debt in the overall financial management of the country is immense. In the economy as a whole, the flow of debt under the banking system is called internal debt.
Apart from Scheduled Banks, loans are also provided by Bangladesh Bank and Cooperative Bank. However, it is not covered by foreign currency loans. There are three divisions of this debt: 1) government, 2) state ownership, and 3) private sector.
At the end of June 2009, the total domestic debt stood at Rs 2,49,040.00 crore. Of these, public, state, and private sectors accounted for 20 per cent, 4 per cent, and 6 per cent, respectively.
A decade ago, in 1999, these sectors accounted for 30 per cent, 7 per cent, and 62 per cent of the total domestic debt, respectively. Such sectoral changes in domestic debt are noticeable as the government intensifies its nationalization program and expands its role in the privatization policy in the economy.