"RBI is unhappy with such schemes," said a senior official of a public sector bank. "RBI wants only such schemes that disclose every detail regarding charges."
In order to increase sales, consumer durable companies tie up with banks and NBFCs to offer zero-interest finance schemes in which a customer is not required to pay any interest on instalments.
Though these schemes look attractive, customers have complained about hidden charges in the past. Consumers actually lose out in the end instead of gaining because they are charged a processing fee, documentation fee and have to forgo cash discount and gift offers.
"A customer should check all charges including processing charge while opting for zero-interest schemes and should check if he or she will be given cash discount, which is offered on all-cash purchases," said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.
Zero-interest finance schemes generally hit the market during the festival season. Compared to public sector banks, private and foreign banks and NBFCs are more aggressive in joining hands with consumer durable companies in offering such schemes.
Lenders and NBFCs are likely to see significant impact on their retail loan portfolio after discontinuation of such schemes.