Sales of high-value consumer electronics, including smartphones and LED TVs, will be severely affected in the upcoming festive season following the Reserve Bank of India’s (RBI) ban on zero per cent interest schemes offered by banks.
“I don’t support this (RBI’s) move. The withdrawal of the provision (of zero per cent interest scheme) is not right. It will have tremendous impact on sales of high-value consumer durables. This will not enhance consumption (in a slowing economy),” said B. S. Nagesh, Chairman of Retailers Association of India.
“People are fully aware that it (interest component) is funded by the manufacturer or retailer. I don’t see anything wrong with the scheme. Now, there will be lot of hassle in paperwork for processing of loans and it will impact sales,” Mr. Nagesh added.
“It is a big blow ahead of the season. About 25 per cent of our sales are through EMI (equated monthly instalment) schemes, and the ban will affect sales. Large part of the affordability is through EMIs and amidst the gloom in the economy, this will not help anyone,” said Himanshu Chakrawarti, CEO, The MobileStore Ltd.
Future Group Chairman Kishore Biyani declined to comment on the matter but said that consumer durables constituted very small portion of Biz Bazaar’s sales.
Commercial banks declined to come on record as the ban had been imposed by the RBI .
“The decision will also affect us. In most cases, manufacturers funded the interest part. The interest subvention was taken care of by the cash discounts. Apart from getting business, the zero per cent interest schemes also made the card-holders to stick to us for the entire tenure of the loan which got us additional business through further use of the card,” said an executive of a private bank asking not to be named. Meanwhile, manufacturers are getting ready with alternative plans to boost sales. “This move will definitely impact consumer buying sentiment. The EMI schemes were very popular. Now we will be rolling out other marketing schemes for the festive season but we don’t have any substitute for zero per cent EMI schemes,” said a Samsung spokesperson.