In a move that may dampen the festive season for consumers, the Reserve Bank of India today banned the zero per cent interest rate scheme on purchase of consumer goods.

While this move may protect consumers from "camouflaged" interest rates, it will also mean that consumers will think twice before buying expensive items, especially electronics, on equated monthly instalments.

"Since the very concept of zero per cent interest is non-existent and fair practice demands that the processing charge and rate of interest charged should be kept uniform product/segment wise, irrespective of the sourcing channel, such schemes only serve the purpose of alluring and exploiting the vulnerable customers," the RBI said in a notification.

"...in principle, banks should not resort to any practice that would distort the interest rate structure of a product as this vitiates the transparency in pricing mechanism which is very important for the customer to take informed decision," it added.

In another important move, the central bank said that no additional charges can be levied on payment through debit cards.

The central bank said there are instances where points of sales levy fee as a percentage of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards.

"Such fee are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments," it said.

"These practices or products thwart the very principle of fair and transparent pricing of products which behold customer rights and customer protection, especially, in the more vulnerable retail segment," it said.

Such practices violate, both in letter and spirit, various provisions of master circular on interest rate on advances "and therefore, you (banks) are advised to strictly desist from these practices hence forth," it added.

About Hemant Verma

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