No-cost EMI is not necessarily free in total. In India, the bank may charge interest while the merchant offsets it with a discount or cashback. GST on interest, processing or conversion fees, and other bank charges may still add to what you pay. The exact result depends on the product, offer, card issuer and repayment tenure.
What “no-cost EMI” usually means
It helps to separate the loan from the merchant’s promotion. The lender can charge interest on the EMI loan, while the merchant reduces the product price or provides cashback intended to offset some or all of that interest. For example, Croma’s published terms describe bank interest being returned through an instant discount or deferred cashback; Voltas’ terms describe discounting the interest from the order price.
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That is an offset mechanism, not proof that the bank has waived interest. The offer’s timing and conditions matter: an instant discount reduces the checkout amount, while deferred cashback may arrive later and may be subject to eligibility requirements.
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Which costs can remain
An interest offset may not cover taxes or other charges. Voltas says GST on interest may be charged above the product price, and that some banks may charge EMI-conversion fees and GST that the offer does not cover. Croma’s terms also say GST applies to processing fees and each EMI, and warn that pre-closure and late-payment charges may apply. These are examples from particular merchant terms, not a universal fee schedule.
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A Reserve Bank of India publication excerpt reports that processing fees on bank loans through BigTech platforms applied even to no-cost EMI, with fees ranging from 0.4% to 3.2% of the product price in the sample. The excerpt also says 18% GST applied to interest charged on these loans. The publication year is not established here, so treat these as findings from that publication—not current charges for every checkout or a range that applies to every offer. RBI publication
How to compare the offer with paying upfront
Compare the total rupees you would pay under each option, rather than relying on the “no-cost” label. The RBI’s lender circular says banks must inform customers of the “all-in-cost” so they can compare finance sources. That is general lender disclosure guidance, not a claim about the exact information shown at every shopping checkout. RBI circular dated 25 November 2008
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- Add up the EMI route. Include every instalment, any down payment, GST, processing or conversion fees, and other applicable bank charges.
- Account for the offset. Note the amount of the instant discount or cashback, when it will be paid, and the conditions you must meet to receive it.
- Check the same item’s upfront price. Include any discount available if you pay in full rather than choosing EMI.
- Compare repayment details. Check the tenure and instalment size alongside eligibility, cancellation, returns, foreclosure and missed-payment rules.
The offer-specific terms establish that offsets and additional costs can vary; they do not establish that no-cost EMI always makes a product more expensive.
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Offers may be limited to selected products or cards. The issuer controls eligibility, tenure and loan rules, so check the terms for the card and offer you intend to use rather than assuming every card or item qualifies.
Croma says its EMI conversion can take 7–10 working days. That timing is specific to Croma’s FAQ, but it illustrates why a successful checkout authorization does not necessarily mean the instalment plan is already visible on your card statement. Confirm the expected conversion timing with the merchant or issuer and monitor your statement.
What to do if you return the purchase
A merchant refund does not necessarily close the EMI loan automatically. Croma says customers must contact the bank to request EMI closure after a refund; interest may continue and bank closure charges may apply if they do not communicate. Ask both the merchant and your issuer what happens in your case, then keep the refund record and the issuer’s confirmation that the EMI is closed.
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What if you miss a payment?
Late-payment fees are separate from the advertised offer. Croma warns that such fees may apply. The RBI’s general FAQ says penal charges must be reasonable, imposed only on the default amount under the lender’s approved policy, and not capitalized. The actual charge and applicable terms depend on your lender, so consult its current schedule and account terms. RBI FAQ on penal charges
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