The RBI is likely to come out with specific guidelines to cover non-banking finance companies (NBFCs) and captive financing units apart from banks in its crackdown on 0% interest financing schemes. The apex bank's recent ruling on the issue is targeted at banks but leaves captives and NBFCs in a grey area. Banks say that's unfair since captive financial arms of luxury carmakers like BMW and third-party NBFCs continue to offer 0% interest loans as a special promotional scheme to attract customer spending during the upcoming festival months. NBFCs say the 0% scheme is an 'insignificant' part of their overall business and the RBI's current guidelines on the matter intends, in spirit if not letter, for both banks and NBFCs to stay away from 0% schemes.

Sumit Bali, executive vicepresident , Kotak Mahindra Bank, said, "We are expecting NBFC guidelines from the RBI in a couple of weeks. Right now, RBI's directive intends in spirit, if not in letter, that all financiers - banks, NBFCs, captives - show the subsidy on interest and subvention separately so the customer knows what the break-up is."

Till the RBI guidelines come along, however,there are several 0% schemes still running in the market including those by captive financing arms of luxury car companies . BMW Financial Services, for instance, has been running a0% scheme for its 5 Series luxury sedan. Other NBFCs also admit that although "insignificant" , zero schemes continue to be part of their repertoire.

When contacted, Phillip von Sahr, president, BMW Group India said: "BMW Financial Services India has exclusively developed well thought-out and flexible solutions for customers. Customised and attractive finance schemes like low EMI, low down-payment , competitive interest rates are made available to customers through BMW Financial Services. In the current market environment , BMW Financial Services India is offering competitive financial schemes to customers to suit their individual needs."

Some financiers say 0% schemes were mostly popular in consumer durable financing and to some extent in twowheeler financing. "In the last few years, 0% financing has come down in cars; it's purely a gimmick done to impact festive purchase," said a senior official from a leading NBFC who did not wish to be identified .

Other NBFCs are resorting to zero schemes on a selective basis. "Zero per cent loan schemes are very minimal in our books especially in trucks and the light commercial vehicle segment," said Dhrubashish Bhattacharya, V-P , Magma.


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