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Ban on 0% EMI schemes to affect banks, consumer durables cos

The 0% EMI scheme has increased the demand for retail loans and sale of consumer durables companies, especially smartphones, TVs and other home appliances

September 27, 2013 10:44 IST | India Infoline News Service
The Reserve Bank of India (RBI) ban on 0% interest schemes for purchase of consumer goods through credit cards could come as a dampener for consumer durable manufacturers as well as customers just ahead of the festive season.

The RBI on Wednesday banned 0% interest schemes for purchase of consumer goods through credit cards.

According to RBI, the 0% EMI schemes offered on credit card outstandings, the interest element is often camouflaged and passed on to customer in the form of processing fee.

Consumer durable manufacturers usually offer 0% EMI schemes, mostly on products such as smartphones, laptops, LED TVs and home appliances.
After the RBI ban on 0% EMI schemes and also asking more disclosures on such scheme, banks have now started withdrawing the scheme ahead of the festival season.

The 0% EMI scheme has increased the demand for retail loans and sale of consumer durables companies, especially smartphones, TVs and other home appliances.

According to some consumers, the 0% EMI schemes are a good option for those who cannot afford to pay the entire price of the product at one time. These schemes allow them to buy the product and make their payments in installments. Not all customers can afford to pay the entire price of the product at one time. Hence, the 0% EMI scheme helps the consumer to enjoy the benefit of the product as well as pay the money in installment.

The 0% EMI schemes are centralised schemes and can be stopped anytime. With the RBI reservations, banks have no other option but to withdraw the scheme, according to some banks.

Consumer durable companies are also of the option that the ban on 0% scheme would hamper sales of most companies, forcing them to restructure their strategies.

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