Credit companies may stop offering no-cost EMI, zero down payment options on purchases: Report

Credit finance companies, brands and non-banking finance companies (NBFCs) may curtail credit norms as they fear higher risk due to job losses and salary cuts amid the coronavirus pandemic. This despite a possibility of the lockdown easing further.

Among the steps being considered include removal of no-cost equated monthly instalments (EMIs) and zero down payment schemes for goods such as refrigerators, air conditioners, TV sets and washing machines, The Economic Times reported.

The move is apparently due to the cascading effect. Manufacturers – who usually bore the cost of interest subvention, which makes no-cost EMI possible for consumers, have refused to continue the practice for low-margin products and long-tenure schemes (beyond 1 year), sources told the paper.

Moneycontrol could not independently verify the report.

NBFCs such as HDB Financial Services and Bajaj Finserv have indicated that consumers would now have to pay the down payment of certain EMIs in proportion to the loan tenure, sources told the paper. This was decided after the default rate for April shot up.

No-cost EMIs would still be on for premium, high-margin products, with tenure lowered to 3-12 months from the previous 15-18 months, the sources added.

Besides NBFCs, brands such as Sony, OnePlus and Samsung have expressed that they would no longer take on interest cost for up to mid-level products and schemes over 1 year. This means consumers may now pay 15 percent yearly interest.

Kamal Nandi, president of the Consumer Electronics and Appliances Manufacturers Association and business head at Godrej Appliances told the paper that all consumer finance companies are relooking their schemes as recovery of past EMIs becomes difficult. “Considering the significant drop in revenue for brands, this will cut costs,” he added.