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Reserve Bank of India has sent consumer durable firms in a tizzy with its decision to put a blanket ban on all kinds of zero per cent interest schemes. The companies are worried that this will hurt consumer buying sentiment, that too when consumers go on a shopping spree during the festival season.
Industry estimates suggest that zero per cent finance offers constitute approximately 35-40 per cent of the total sales of the industry out of which 15 per cent are undertaken using credit cards.
Manish Sharma, Managing Director, Panasonic India, said, “Currently, tough business environment marked by high inflation, drop in corporate earnings and decline in new business orders is already taking a toll on the festival season. Further, with the RBI ban on zero per cent interest rate schemes for purchase of consumer goods, we at Panasonic India feel that this notification will further dampen festival spirit among consumers.”
A Samsung India spokesperson added, “This move is likely to hit the consumer buying sentiment especially since it is coming just ahead of the festival season. The zero per cent finance schemes have been doing very well in the market.”
Shantanu Das Gupta, Vice President – Corporate Affairs & Strategy, Whirlpool of India, said it will have some degree of impact depending on company to company. “It is just coming before the festival season and could make some consumer rethink their purchases,” he added.
Retailers believe that the average ticket size could reduce. Nilesh Gupta, CEO of Vijay Sales, said, “It could reduce consumer spending and reduce the average ticket size in the short term.” Though he added that consumers usually use such schemes to buy products such as mobile phones and less of durables. Ajit Joshi, MD and CEO, Infiniti Retail, said that the company will have to wait and watch the impact of this decision on consumers and retailers.
Though the players maintain that most of the consumer products financing is done by Non-Banking Financial Companies, they said that it was not clear if this directive is applicable on NBFCs.
When contacted, Bajaj Finance refused to comment.
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