Business Studies · Retail Banking
A bank uses a Tie-up with an OEM to offer Zero Percent Interest financing for a new product launch. How does this arrangement primarily benefit the bank, even though the stated interest rate is zero?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank is permitted to sell the borrower's loan data to third-party institutions for a profit.
- 2The bank receives substantial fixed fees from the OEM for using the bank's brand name.
- 3The OEM compensates the bank for the interest component upfront (subvention fee).✓
- 4The bank charges a substantial penal interest rate on delayed payments.
Correct answer
The OEM compensates the bank for the interest component upfront (subvention fee).
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