RBI bans 0% interest scheme on purchase of consumer goods

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... The RBI said the interest rate charged is "camouflaged" and passed on to customer as processing fee by banks offering the zero per cent EMI schemes on credit card outstanding for purchasing retail products.

"Since the very concept of zero per cent interest is non-existent and fair practice demands that the processing charge and rate of interest charged should be kept uniform product/segment wise, irrespective of the sourcing channel, such schemes only serve the purpose of alluring and exploiting the vulnerable customers," the RBI said.


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So when you buy something on 3/6/9 month emi, they show the payments. Processing fee is mentioned or when its not they say that also.

So where is the cheating here ?
 
blr_p said:
So when you buy something on 3/6/9 month emi, they show the payments. Processing fee is mentioned or when its not they say that also.

So where is the cheating here ?
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Lame move. It's to save the people too dumb to read the fine print. Caveat emptor is too alien a concept for Indians it seems.
 
What RBI means is the 0% transactions are not fair trade and banks still charge stuff saying processing fee blah blah etc.
 
When I get a house/car loan at x.xx%, the bank charges a processing fee too. Why doesn't the RBI ban those too?
 
letmein said:
When I get a house/car loan at x.xx%, the bank charges a processing fee too. Why doesn't the RBI ban those too?
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Perhaps what theyre trying to curb is companies convincing buyers that they're paying the same amount as they would if they paid cash up front.
 
Looks like Mr. Raghuram's latest "consumer goods" purchase had some issues.

These change makes sense only if the total payment in form of price + processing fee far exceeds price + interest option. And that is not the case most of the time.

Most companies give the zero % offers because they want to mark the products as sold and show it on the books as quickly as possible. Not in terms of EMI which is yet to be paid. That way they look more profitable.

Realistically, lets take a look at flipkart. Their website says "Zero Processing Fee on EMIs" -- replacing the "interest" with "processing fee" - and still showing the details for a zero % EMI - "flat processing fee of Rs 100 on the 3-month plan | Rs 300 on the 6-month plan | Rs 1,200 on the 9-month plan | Rs 1,500 on the 12-month plan."
On a purchase of a say 30k TV, going by the credit card interest rates - opting for a 3 mth plan turns out to be:
20% paid upfront - 6k
80% in EMI - 24k
Even at the lowest % say 1% it turns out to be 240 rs which is still lower than the 3mth plan. The nearest we can get to a 100 fees is when the interest charged is 0.1% -- and frankly, not many banks will be thrilled.

Edit: Some say it might be to provide consumer with more information:
http://www.business-standard.com/ar...lers-dismayed-at-rbi-move-113092401028_1.html
 
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I'm not very happy with this move as 0% EMI allowed consumers to buy things easily. I know a lot of people who are well off but buy iPhone's on EMI and once the EMI is about to get over, its time for them to sell it and pick another iPhone. This way they can keep buying newer iPhone's every year. This is a bad move especially during festive time.
 
Right, so what i understood is there will no longer be any more 0% EMI options available.

So we will see 0.1% from now on :D
 
NeXT said:
I'm not very happy with this move as 0% EMI allowed consumers to buy things easily. I know a lot of people who are well off but buy iPhone's on EMI and once the EMI is about to get over, its time for them to sell it and pick another iPhone. This way they can keep buying newer iPhone's every year. This is a bad move especially during festive time.
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well off , but need emi's , then sell the phone while picking up a new one, and then again go for emi? sounds cash strapped rather than well off, so much for peer pressure and the * need to have the latest *.

:)
 
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^Depends, like I can very well spend a good amount on a device but instead of paying upfront and 'blocking' that much of my money, I will prefer for it paying over an EMI.
 
Think of it as a way to reduce on depreciation. Selling every 6 months is to lose less than every 1 year as warranty is still in place. What's wrong with buying on emi instead of a lump sum. If there is no or very little interest its a better option.

Stick the same amount in a FD and after 6 months interest earned is how much you saved. Lowers the price by an extra ~Rs.1-2k
 
Also if someone is buying/upgrading to a new phone, if he doesn't sell it what should he do with it, make a museum of cellphones :P
 
blr_p said:
Think of it as a way to reduce on depreciation. Selling every 6 months is to lose less than every 1 year as warranty is still in place. What's wrong with buying on emi instead of a lump sum. If there is no or very little interest its a better option.
Stick the same amount in a FD and after 6 months interest earned is how much you saved. Lowers the price by an extra ~Rs.1-2k
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Roxtin said:
Also if someone is buying/upgrading to a new phone, if he doesn't sell it what should he do with it, make a museum of cellphones :p
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err, donate it to youngsters in the family, not the so well off etc etc, my point was if someone's that well off, he wouldnt really bother about 1-2k would he?
 
Course he would, take the s4, pay in a lump sum and its more expensive, go 6 month emi and avail a 15% cash back that to at no interest, so there's an extra savings. 41k becomes 34k.
 
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