Interest on festive-season instalment deals is often shifted into the product price, lost discounts or fees. Compare the cash price with the total repayment before deciding whether the offer is really affordable.
Every festive season, the same promise appears in electronics stores: no-cost EMI. A television, washing machine or smartphone is advertised as if it can be taken home in easy monthly instalments without any financing charge. But, as The Hindu BusinessLine notes, the cost does not vanish. It is usually shifted into the price, the discount structure or the loan’s fine print.
The Reserve Bank of India has long warned that so-called zero per cent interest schemes can be misleading if the interest is hidden in a processing fee or offset through a lower discount for cash buyers. In practice, the lender still charges interest, and the retailer or manufacturer may absorb it by inflating the product’s price or withholding a discount that would otherwise apply. Industry analysis by PwC says that in many consumer-durable finance deals, the retailer bears the cost, sometimes sharing it with the lender, which is why the offer can look free while still being commercially funded.
The maths can be revealing. Razorpay’s guidance on no-cost EMI explains that a customer’s monthly instalments can look like simple instalments on the sticker price, while the lender is actually charging interest behind the scenes. Once goods and services tax is added to that interest, plus any processing fee, the total outlay can rise materially. HDFC Bank’s EMI terms also show that GST is charged on the interest component and that processing fees may apply, underscoring that the headline offer may not match the final amount paid.
That matters because instalment purchases change how people judge affordability. A ₹60,000 phone may feel out of reach if the question is whether it can be bought outright, but it can seem manageable if the store reframes the decision as a ₹10,000 monthly payment. Retailers know this. As The Hindu BusinessLine article observes, the EMI structure can lift conversion rates by making the price less visible. The danger is that several such purchases can stack up at once, leaving a household with heavy monthly commitments before rent, food and other essentials are covered.
There is also the risk of borrowing costs rising sharply after a missed payment. CIBIL warns that overdue credit-card balances can attract interest of up to 36 per cent a year, along with late fees, and missed payments can damage a customer’s credit profile. RBI’s credit-card guidance says issuers should clearly disclose annual percentage rates, finance charges and late-payment terms, precisely because consumers can be caught out when the full cost is not made obvious at the point of sale.
None of this means every no-cost EMI is a trap. If the cash price and the EMI price are truly the same, and the only extras are modest tax and fees, spreading the cost of a necessary purchase can be reasonable. But the test is simple: ask for the cash price, ask for the full amount you will pay across all instalments, and decide whether you would still buy the item if you had to pay in full today. If the answer is no, the offer is not making the product cheaper. It is only disguising the fact that it is still expensive.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
