Luo Yan was delighted when he received a $140,000 loan from Citibank in Shanghai to fund his two years of study for an MBA from the prestigious Massachusetts Institute of Technology (MIT).

"I thought it is difficult to get a loan, but it seems easy with a foreign bank," says Luo, who has worked at a fund management company for three years in Shanghai and was recently accepted at MIT.

He is not sure exactly how long he needs to pay back the loan, which carries an annual interest rate of 7.5 percent - it might take 10 years.

With Chinese commercial banks digging hard in profitable intermediary businesses, rapidly growing numbers of Chinese students in schools overseas for advanced education could provide a new attraction.

Citibank has even established an overseas education financial center to offer a package of services.

Statistics from the Ministry of Education show that the number of students going overseas to study reached 1.07 million at the end of 2006.

But experts say financial services the students need cannot be adequately met at this time, as few domestic banks lend money for overseas study.

Limited numbers of educational renminbi loans are offered by a handful of large banks and some visa application materials and fee transfer services are possible at some lenders, but hopeful students wonder what their chances are at domestic banks.

"I really don't know what I can receive from domestic banks. I think I will borrow most of the money from foreign banks after I go abroad," says Michael Hu, an employee of a foreign company who received an offer in an MBA program at a Canadian university.

Hu says he doesn't know what he would do if something happens and he couldn't afford to pay tuition fees, which are always high for an MBA program.

"This is the case for a lot of Chinese students studying overseas and I think properly serving these customers could be very profitable," Hu tells China Business Weekly.

China Construction Bank and the CITIC Industrial Bank have developed an overseas education guarantee, under which the banks will issue letters of credit to selected schools promising to take full responsibility should students fail to pay their tuition.

"The time is ripe for domestic banks to get into this field, as regulatory departments have shown tremendous support for the new business," says one expert.

The People's Bank of China has now issued a management provision on commercial banks' intermediary services that will serve as a guideline for banks to further develop.

Bank of China, one of the country's largest State-owned banks, and Shanghai Pudong Development Bank, are now the only two domestic banks providing foreign currency loan services for Chinese students studying abroad.

Bank of China has taken advantage of its numerous overseas branches by depositing foreign currency into overseas accounts once students are abroad.

The service is offered in the country's major cities, including Beijing, Shanghai, Tianjin, Guangzhou, Shenzhen, Nanjing, Hangzhou, Xi'an and Wuhan.

But it applies only to overseas students pursuing master's degrees and each loan is limited to $40,000, though students may apply for additional loans during their time studying abroad.

Students can apply for the service by offering enrollment certificates from foreign universities or colleges. The term of the loan is six years, and the interest rate is almost on par with other kinds of loans.

Bank of China started loan service in 1998 for overseas Chinese students but issued only renminbi loans, which have totaled 200 million yuan.

Officials say that other domestic banks are showing interest in offering the foreign currency service.