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Originally Posted by rohitbagai Although RBI policy decision is another topic for discussion, all ecom stores have stopped offering emi scheme. The interesting part is that only HDFC Cards are still offering EMIs and PayU supports it too. Called up snapdeal (uses PayU) and they said HDFC is also in a process to withdraw. |
Slight correction. The RBI mandate involves only the Zero percent EMI schemes, where the 'subvention' charges are paid by the manufacturers/ retailers. RBI believes that this type of scheme could result in a small hike in the actual 'selling price' of the item, because the subvention cost has to come from somewhere. This concern on the part of RBI has led to this mandate.
Speaking from experience, in the case of higher margin products/ items, the interest/ subvention cost normally goes from the retailer or brand's margin so the RBI's fears are in some ways, unfounded. Eg: Various apparel EMI schemes, MRP of garment = Rs 3000/-. Recovered in 3 EMI's of Rs 1000/- each. The brand/ retailer pays the rate of interest or subvention to the bank and this is considered as the 'acquisition cost' of new consumer OR as marketing cost.
However, in the case of low margin items, the consumer may be required to pay an 'ever-so-slightly' higher EMI, which, over the period/ tenure of the said EMI, pays off the 'subvention charges'. So lets say it is an electronic appliance. The EMI paid would be marginally higher because the interest/ subvention has to be part norne by the retailer, manufacturer and consumer. This is disguised within a slightly higher MRP which impacts the consumer. The negative impact happens on those consumers who pay upfront or pay cash, because they end up paying a marginally higher MRP. Having said that, we know that most consumers who buy high end products nowadays, tend to buy them on EMI because it is far more palatable this way!
Basically, through these zero percent EMI schemes, you don't knock the consumer over the head with a fat and high initial cost or 'Cap-Ex'. The interest/ subvention cost is 'disguised' a bit and recovered in far easier to bite chunks, over time. This latter method is far more palatable to consumers at large as we all know.
The consumer will still have access to various EMI schemes, but he/ she will have to pay the requisite interest component to avail of the same. The schemes themselves have to necessarily be 'more upfront and straightforward', without any 'hidden charges'. The MRP of the products also cannot be 'artificially inflated', however marginally, to accommodate the potential 'interest/ subvention' costs.
The whole 'Zero' percent EMI scheme game, actually is a huge 'inducement to purchase' and is actually aimed at 'instant gratification' which is what majority of the consuming classes want. It is an excellent marketing gimmick/ tool, and should not have been killed in this way by the RBI.
End of the day it is a very fine line to tread and our policy makers also need to understand that issuing these kinds of policy 'Fiats' are not the best way forward. The policy should also be a reflection of real consumer needs, market pulse and should be marketed well too. That is asking for the moon I guess, because it is like asking the Government and RBI etc to behave like a consumer focussed, concept marketing conglomerate!