MUMBAI: In a move that is likely to dent retailers' festive season sales, the Reserve Bank of India has barred 'zero per cent interest' schemes offered by banks to credit card holders. Banks will now be able to recover dues through equated monthly installments only when customers are billed regular interest charges.
Describing the zero per cent interest scheme as a 'pernicious practice' which deters customer protection and accounting integrity, RBI has said that banks should not resort to any practice that would distort the interest rate structure of a product as this 'vitiates transparency in pricing mechanism' and prevents customers from taking informed decisions. Bankers said RBI has indicated that zero interest loans are a violation of its lending norms which prevent loans below a bank's base rate.
Retailers said the directive would deprive aspirational consumers of a facility to acquire goods they cannot otherwise afford and expect that the festival sales might get further depressed this year. Banks said that over Rs 1,000 crore of billings out of the monthly credit card billings of Rs 11,000 crore were coming from purchases billed under EMIs. (TOI)
Describing the zero per cent interest scheme as a 'pernicious practice' which deters customer protection and accounting integrity, RBI has said that banks should not resort to any practice that would distort the interest rate structure of a product as this 'vitiates transparency in pricing mechanism' and prevents customers from taking informed decisions. Bankers said RBI has indicated that zero interest loans are a violation of its lending norms which prevent loans below a bank's base rate.
Retailers said the directive would deprive aspirational consumers of a facility to acquire goods they cannot otherwise afford and expect that the festival sales might get further depressed this year. Banks said that over Rs 1,000 crore of billings out of the monthly credit card billings of Rs 11,000 crore were coming from purchases billed under EMIs. (TOI)
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