The concept of no-cost EMI has evolved and people often ponder over the fact how no cost EMI is beneficial to a business and especially to banks.
KNOW WHAT A NO COST EMI IS
In a layman’s language, no-cost EMI means the distribution of a particular amount into monthly instalments on which no interest is to be paid. But the same is not true in reality. The top banking lawyers in India while discussing the concept of no-cost EMI in India lay great emphasis on the circular issued by the Reserve bank of India in the year 2013 which laid down that the concept of no-cost EMI or zero interest EMI does not exist. While explaining the concept of no-cost EMI the RBI said that the interest element in no-cost EMI schemes is often camouflaged and passed on to the customer in the form of processing fee or cancellation of the discount offer. The bank receives the interest amount even on a no-cost EMI scheme because the RBI has clearly laid down that no loan can be offered without an interest being charged. It’s important to mention that the interest on the installments is not charged in addition to the total amount but it is adjusted from the total amount only.
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