RBI bans 0% interest scheme on purchase of consumer goods

mangaloretoday.com

Mumbai,Sept 26: The Reserve Bank of India has banned the zero per cent interest rate scheme on purchase of consumer goods though credit cards ahead of the festival season. The directive was issued to banks on September 17, but the central bank made it public on Wednesday.

 

The move is aimed to protect consumers from "camouflaged" interest rates, but it might impact sale of electronic goods in the busy festive season. The move is also likely to affect credit offtake at a time when banks are witnessing sluggish demand.

The RBI said 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... In principle, banks should not resort to any practice that would distort the interest rate structure of a product as this vitiates the transparency in pricing mechanism which is very important for the customer to take informed decision," the RBI said.

In another important move, the central bank said that no additional charges can be levied on payment through debit cards.

The central bank said there are instances where points of sales levy fee (as a percentage of the transaction value) as charges on customers who are making payments for purchase of goods and services through debit cards.

"Such fee are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments," the RBI said.

Such practices violate, both in letter and spirit, various provisions of master circular on interest rate on advances "and therefore, you (banks) are advised to strictly desist from these practices hence forth," it added.