September 26, 2013 3:56:22 am
The Reserve Bank of India has directed banks to terminate relationship with merchants who charge customers a certain percentage of debit card transaction value as processing fee.
Such fees 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, the RBI said in its circular on discouraging zero per cent EMIs.
Some outlets,especially fuel stations,are still charging a fee from customers who use debit cards.
According to the RBI,in the zero per cent EMI schemes offered on credit card outstandings,the interest element is often camouflaged and passed on to customer in the form of processing fee. Similarly,some banks were loading the expenses incurred in sourcing the loan (viz DSA commission) in the applicable RoI (rate of interest) charged on the product.
Since the very concept of zero percent interest is non-existent and fair practice demands that the processing charge and RoI charged should be kept uniform product or segment wise,irrespective of the sourcing channel,such schemes only serve the purpose of alluring and exploiting the vulnerable customers,it said.
The only factor that can justify differential RoI for the same product,tenor being the same,is the risk rating of the customer,which may not be applicable in case of retail products where the RoI is generally kept flat and is indifferent to the customer risk profile, it said.
The RBI circular further said subventions and discounts on price or moratorium period for payment are often offered by dealers or manufacturers on their products to customers while they make the purchase by availing loans from banks. In such instances,it is the responsibility of the banks,who are using their good offices to get the better bargain,to make customers fully aware of these benefits and also pass on the benefits to them fully and indiscriminately while sanctioning loan,the RBI said.
More importantly,this has to be done directly without tampering with the applicable RoI of the product, it said.
* RBC says such fees are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants
* According to the RBI,in the zero per cent EMI schemes offered on credit card outstandings,the interest element is often camouflaged and passed on to customer as processing fee
* The bank also says that if there is a discount in the price of a product,the loan amount sanctioned for the purchase should be after taking into account the discount,rather than giving effect to the benefit by reducing the rate of interest
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