Mumbai, Sep 24( ) : RBI has asked banks to stop the 0% EMI scheme as they are only exploiting the customers that goes against the fair market practices.
The central bank has sent out a confidential circular to banks on September 17. Two banks have withdrawn the scheme. 30% of the sales during festival season are done through credit cards using the 0% interest scheme.
Mobile phone dealers would be hit as they lure customers with exchange offer sand the 0% scheme. This scheme came under the RBI radar as the usage of this scheme increased by 34% from July last year to July this year. In the last fiscal , the loans under this scheme was 12%.
RBI found that in the scheme which is said to be zero percent interest, the price of the product is divided into EMI which is a fraud on the public. The amount in EMI attracts a processing fee and interest is charged.
Banks had different interest rates for products and they were not uniform. RBI has told banks to standardize interest rates for those not coming under the scheme. It also told banks to stop financing on MRP of a product and instead go by market price so that the customers get the margin given by the manufacturer and retailers.
Consumers must be informed about discounts on price and interest rate when taking a loan under this scheme. At present the banks block the loan amount in the card and charge a nominal interest apart from processing fee. Using this route the customer loses the discount given on the product if paid in cash.
Banks will have to rework this scheme after talking to manufacturers and retailers. This will take two months’ time. Shops add extra fees to the bill if paid through debit or credit card. RBI has told banks that mutually agreed terms between retailers and banks have no provision for this.