The Reserve Bank of India (RBI) banned the ‘zero percent interest’ rate scheme on purchase of goods/products through credit cards to protect the consumers from camouflaged interest rates. It may put impact on the sale of products during festive season.
The directive was issued to all the banks on September 17, but it was made public on Wednesday. The banks usually offer ‘zero percent interest’ alluring the consumers to purchase the products through their credit cards. However, the move will upset the consumers, who were planning for shopping during Dussehra and Diwali.
“Since the 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,” said an RBI notification.
“In such schemes, the interest element is often camouflaged and passed on to the customer in the form of processing fee”, the central bank said on Wednesday, adding, the banks should not resort to any practice that would distort the interest rate structure of a product as it reduces the transparency in pricing mechanism. Therefore, it is important for the customers to take proper decision while going for purchasing a product through credit cards.
In another move, no additional charges can be made on payment through debit cards. The RBI made it clear that the customers will not pay extra fee for swiping the debit cards. The agreement is between the shop owner and the bank, but charging the customers for it is neither justified nor permitted.