The new RBI diktat against “zero % EMI” plans could have some interesting implications for the consumer finance and consumer durables industries. In essence, banks (and other financiers) used to offer “0% EMI” on many consumer durables. This meant the customer paid the sticker price for the goods in question, while the bank got a dealer-discount. This discount was opaque to the customer and effectively, it was the interest charged by the bank.I assume that banks will now have to state upfront what discount they are getting, in the sense that they will state an interest rate for financing. In that case, the customer has the option of either buying the goods cash-down by demanding the same discount rate from the dealer. Or the customer could go shopping for a better rate of financing than the bank offers.
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