The Reserve Bank of India’s instruction to the banks to stop their offer of zero interest equated monthly instalment (EMI) schemes has got the retailers of consumer durables and other products worried as almost 20 per cent of their retail sales here take place through such schemes.
The decision, insist both dealers and retailers, would impact the sales as many of the customers would now prefer to wait for company discounts or for further clarity on the issue.
South Delhi-based dealer in computers Feroze, who also retails products of various companies, said “about 20 per cent of all our retail sales were through such financing schemes. These schemes were availed of by people who did not have enough money with them upfront to make purchases but could easily stagger their payments over a period of six months or so.’’
Differing with the RBI’s argument that such schemes were only “alluring and exploiting vulnerable customers”, Feroze said: “Suppose you were to by a laptop worth Rs.30,000 and its payment was split into six EMIs of Rs.5,000 each with no file charges or processing fee, then where is the question of being cheated?’’
He pointed out that in the sale of computers at least there were a number of companies that were shouldering a burden of the extra charges while asking the dealers to chip in with some. “In some company products for example, there is zero per cent interest and zero processing fee. The dealer and the merchandiser have an agreement whereby 1.5 per cent of the cost is paid by the dealer towards these processing charges. But for the dealer it results in extra business and he end up earning from volumes.’’
As for the cash discounts, Feroze said they are non-existent with products of major companies. “Big companies insist that products are sold in retail too at the internet list price and there is no change in the rates. It is only if a dealer knows you personally, he would probably offer you a discount from his 3-4 per cent commission but that you can also get on financed products.’’
With nearly 40 per cent of all of their sales taking place during the festive season that begins with Navratras and runs up to December-January, many of the dealers are worried about declining retail sales and are hoping that the companies would come up with schemes to counter the effect of the finance restriction.
As Sachin Srivastava, who deals in mobile phones in Amar Colony, said the sale of the expensive phones is what is likely to suffer the most. “People do not have large disposable funds in their accounts and they would probably delay their decision to make purchases. So the retail market is bound to suffer this festival season.’’
At an East Delhi outlet of Sargam Electronics, the staff is, however, confident that a way around the present situation would be found. “Even if the banks would not provide zero per cent finance, we can still get you such finance from the private capital companies. You will only have to pay a Rs.600 file charge,” said a sales executive.
But, he hastened to mention that there would be a difference in the zero per cent finance being provided by the private player.
“While the banks used to convert the payment into 6 EMIs on zero per cent interest basis, now the buyer would be required to pay one-third of the total cost and the remaining two-third would be financed. The repayment would be required in eight months.’’
This said, the executive exuded confidence that the market would find a way out to remain in business.
