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Reserve Bank of India Bans Zero Percent Interest Rates Schemes

Reserve Bank of India on 25th September, 2013 banned zero per cent interest rate schemes for purchase of consumer goods. The decision has taken in order to protect consumer interest.

In this regard Reserve Bank of India issued a notification to all the Schedule Commercial Banks and local area banks.

Reserve Bank of India Directives

  • The very concept of zero per cent interest is non – existent and such schemes only serve the purpose of alluring and exploiting vulnerable customers. Banks should neither resort to any practice that would distort the interest rate structure of a product nor hide any processing fees.
  • With regard to subvention, the loan amount sanctioned for any purchase should be only after all the benefits and discounts are passed on to the customer fully and indiscriminately, without tampering with the applicable rate of interest.
  • The consumers should not be levied any additional charge for payments made through debit cards.
  • All banks must stop these practices as they violate the very principle of fair and transparent pricing of products which beholds customer rights and protection, especially, in the more vulnerable retail segment.

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

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