RBI says no zero percent interest scheme for buying consumer goods

In the zero per cent EMI schemes offered on credit card outstanding, the interest element is often camouflaged and passed on to customer in the form of processing fee

The Reserve Bank of India (RBI) on Wednesday banned the zero percent (0%) interest rate scheme for purchase of consumer goods, a move intended to protect customers. However, it may dampen sales and spirits, especially during the festive season.


The central bank has also said no additional charges can be levied on payment through debit cards.


“...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 an informed decision,” RBI said in a notification.


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


In the zero per cent equated monthly installments (EMI) schemes offered on credit card outstanding, the interest element is often camouflaged and passed on to customer in the form of processing fee.


“Similarly, some banks were loading the expenses incurred in sourcing the loan (through commission paid to direct selling agency) in the applicable rate of interest charged on the product,” RBI observed.


The notification further said the only factor that can justify differential rate of interest for the same product, tenor being the same, is the risk rating of the customer, which may not be applicable in case of retail products where the interest is generally kept flat and is indifferent to the customer risk profile.


With regard to subvention, it said, the loan amount sanctioned for the purchase should be after taking into account the discount, rather than giving effect to the benefit by reducing the interest.




4 years ago

The Hindu Editorial of 4th October 2013 titled ‘Taking interest in transparency’ is timely on the belated action of the Reserve Bank of India (RBI). Many consumers have already gone through exploitation by such unscrupulous practices of the banks. Better late than never but the RBI has still a long way to go before ensuring legitimate consumer protection from many forms of exploitation by banks, especially terms and conditions, which are often unilateral, arbitrary and prejudiced against the consumers’ genuine interest and imposed on them who are unsuspecting and vulnerable. I have been trying to persuade the RBI to examine all terms and conditions of all products and services offered by banks and take steps to ensure banks’ terms and conditions will stand the test of fairness and transparency, but not with any tangible response so far.

S. Ramu

Ramesh Iyer

4 years ago

Well, seasons shoppers and credit card users know this. After all, no FI will offer 0% EMI and not earn anything for this service. The FIs are shrewd businesses, not charitable institutions. This RBI move will only force them to re-phrase their schemes and perhaps make the charges more transparent / easy to compute.

SEBI bars Gennex Lab, Vinod Baid from markets for three years

According to SEBI, the company planted false announcements in order to create an opportunity for Vinod Baid to offload his shares in the market at inflated prices and generate artificial interest in the scrip of Gennex Lab

Market regulator Securities and Exchange Board of India (SEBI) has barred Gennex Laboratories Ltd (GLL) and its promoter-chairman, Vinod Baid, from the market for  three years due to alleged manipulative dealings related to the company.


However, the regulator dropped the allegations against the company's directors - UC Bhandari, Y Ravinder Reddy and Kishore Jhunjhunwala - as there was "no material to establish that they were in charge of day-to-day affairs of GLL or that the alleged violations occurred with their consent or connivance".


The market regulator said Gennex Lab, earlier known as Prudential Pharmaceuticals, had "planted false announcements in order to create an opportunity for Vinod Baid to offload his shares in the market at inflated prices and generate artificial interest in the scrip of GLL. Vinod Baid, being the promoter, chairman and executive director of GLL has played an active role in issuance of such false announcements that had potential to influence and induce the buying and selling in its shares by investors".


According to SEBI, Baid was instrumental in the issuance of false corporate announcements and fraudulently sold his 9.60 lakh shares in the company through Mercury Fund Management Company, a connected entity of GLL, "taking advantage of the positive impact created in the market by the corporate announcements".


As per the probe, some of the alleged false announcements were related to GLL's investment proposal with Singapore's Innovesco and its 51% stake purchase in Ammana Bio Pharma, among others.


SEBI's show-cause notice had alleged GLL (, its chairman and directors, of making false corporate announcements to create artificial market in the company shares and manipulate the same in a fraudulent manner between 2007 and 2008.




3 years ago

I wanted to thank you for this great blog! I really enjoying every little bit of it and I have you bookmarked to check out new stuff you post.

Vinayak Bhimrao Mudholkar

4 years ago

Does this mean that Gennex Lab will not be traded for 3 years. It would mean a punishment to the investors....I am asking this out of curiosity & doesn't hold any position in the scrip.

NSEL fallout: ICAI begins probing Financial Technologies, NSEL issues

The accounting watchdog has begun looking into the matter where auditors of Jighesh Shah-led Financial Technologies and NSEL have withdrawn their audit reports

With Deloitte Haskins & Sells, the auditors of Financial Technologies (India) Ltd (FTIL), withdrawing their audit report, the Institute of Chartered Accountants of India (ICAI) has begun probe into the matter. FTIL is the promoter of crisis-hit National Spot Exchange Ltd (NSEL). 


Subodh Kumar Agrawal, president of ICAI, said, “There are certain provisions in the auditing standards that allow an auditor to withdraw report...We are looking into it and will gather information from the persons concerned including various regulators and others concerning Financial Technologies India Ltd (FTIL) and NSEL”.


As per the practice, we would give those 20-21 days to submit the information, he added.


On Tuesday, Deloitte Haskins & Sells withdrew its audit report on FTIL saying the financial statements for 2012-13 financial year cannot be “relied upon” any “longer” in the wake of NSEL payment crisis.


According to sources, the withdrawal came since NSEL’s auditor Mukesh P Shah & Co also withdrew the report.


The audited accounts were to be placed for FTIL’s annual shareholders meeting today but the auditor red-flagged the financial statements and withdrew its report.


NSEL, a company promoted by FTIL, is facing a crisis of settling Rs5,500 crore dues to 148 members-brokers, representing 13,000 investor clients, after its trade was suspended on 31st July by government orders.



R Balakrishnan

4 years ago

Delightful- ICAI still has no clue about what is to be done. Seems to be plugged with morons at all end.

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