Subvention Types & Calculation
Every subvention has a type that determines how the EMI interest cost is shared between you and your customer. The type you choose -- no-cost or low-cost -- controls the constraints on discounts, the validation rules the system enforces, and the effective interest rate the customer sees at checkout. Understanding these mechanics helps you configure subventions correctly and avoid validation errors during creation.
When you create a subvention in Command Center, you select either No Cost EMI or Low Cost EMI as the subvention type. This selection drives three things: the subvented interest rate (the effective rate the customer pays), the discount logic (which discount fields are available and how they interact), and the validation rules (what the system checks before saving or applying the subvention). Subventions are part of the Boostr Affordability Engine.
The discount you configure on a subvention reduces the EMI scheme's standard interest rate. The system validates that your discount values are consistent with the subvention type and do not exceed the EMI scheme's interest rate. If validation fails, the system returns an error and the subvention cannot be saved or applied.
| Subvention Type | Subvented Interest Rate | Discount Logic | Validation Rules |
|---|---|---|---|
| No Cost EMI | Automatically set to 0% | Either interest discount OR cashback discount (mutually exclusive) | Discount cannot be ≥ EMI scheme interest rate |
| Low Cost EMI | User-specified, must be greater than 0% | Both interest discount AND cashback discount can be set | Discounts cannot be 0.0; cannot be ≥ EMI scheme interest rate |
The subvention type cannot be changed after creation. If you need to switch between no-cost and low-cost, create a new subvention. See Creating Subventions for the full creation workflow.
No Cost EMI
No-cost EMI is the most aggressive affordability option. The customer pays zero interest on the EMI, and you absorb the entire EMI interest cost. This type is commonly used during seasonal sale events, product launches, and high-value promotions where removing the interest barrier drives higher conversion.
How no-cost subventions work
When you select No Cost EMI as the subvention type, the system automatically sets the subvented interest rate to 0%. You do not enter a rate manually -- the system forces it to zero regardless of any other configuration. This means the customer's effective interest rate on the EMI is always 0%, and the full interest cost of the EMI scheme is absorbed by you as the merchant.
The subvention type value stored internally is no_cost. At checkout, when a customer selects an EMI option that matches a no-cost subvention, the system applies the subvention and displays a 0% interest rate. The customer's EMI installments are calculated based on the principal amount only, with no interest component.
No-cost subventions are the simplest to understand from the customer's perspective -- they see "No Cost EMI" and know they pay exactly the product price spread across installments, nothing more.
Discount logic for no-cost subventions
No-cost subventions enforce a mutually exclusive discount model. You can set either an interest discount or a cashback discount, but not both simultaneously. This constraint exists because the interest rate is already zero -- applying both discount types would be redundant and could create conflicting calculations.
The mutual exclusion works as follows:
- If you set an interest_discount value, the system automatically resets
cashback_discounttoNone. The interest discount represents the percentage reduction applied to the EMI scheme's standard interest rate. - If you set a cashback_discount value, the system automatically resets
interest_discounttoNone. The cashback discount represents the value returned to the customer after payment completion. - You cannot set both fields to non-None values at the same time. If you attempt to provide values for both, the system will retain only the most recently set field and clear the other.
Choose interest discount when you want the benefit applied upfront at checkout. Choose cashback discount when you want the customer to pay the full amount and receive the benefit after order completion.
Low Cost EMI
Low-cost EMI offers a middle ground between standard EMI and no-cost EMI. The customer pays a reduced interest rate that you specify, and you absorb the difference between the EMI scheme's standard rate and your specified rate. This type is useful when you want to improve affordability without bearing the full interest cost.
How low-cost subventions work
When you select Low Cost EMI as the subvention type, you must specify a subvented interest rate that is greater than 0%. This is the effective interest rate the customer will pay on the EMI. The system does not auto-set this value -- you enter it based on how much of the interest you want to absorb.
The subvention type value stored internally is low_cost. The rate you specify must be lower than the EMI scheme's standard interest rate for the subvention to provide a meaningful benefit. For example, if an EMI scheme has a 14% interest rate and you set the subvented interest rate to 5%, the customer pays 5% interest and you absorb the remaining 9%.
At checkout, when a customer selects an EMI option that matches a low-cost subvention, the system displays your specified rate instead of the standard rate. The customer's EMI installments are calculated using the reduced rate, resulting in lower monthly payments compared to the standard EMI option.
Discount logic for low-cost subventions
Low-cost subventions use a combined discount model. You can set both an interest discount and a cashback discount on the same subvention. This provides flexibility to structure the benefit in multiple ways -- reducing the interest rate and providing a cashback reward on the same transaction.
However, there are constraints on the values:
- Neither
interest_discountnorcashback_discountcan be set to 0.0. A zero discount on a low-cost subvention would be contradictory -- it would mean you are not providing any reduction, which conflicts with the purpose of the subvention. - Both discount values must be positive when set. You can leave a discount field unset (None), but if you provide a value, it must be greater than zero.
- The combined effect of the discounts determines the customer's final effective rate. The interest discount reduces the interest rate directly, while the cashback discount provides a post-payment return.
If you set either discount to 0.0 on a low-cost subvention, the system will reject the configuration with the error: "Discounted Interest can't be 0.0 for Low Cost Subvention." Ensure all configured discount values are greater than zero.
Discount Validation Rules
The system enforces several validation rules when you create or apply a subvention. These rules prevent misconfiguration and ensure that the discount values are mathematically consistent with the EMI scheme's interest rate. Validation occurs both at creation time (when you save the subvention in Command Center) and at checkout time (when the system evaluates whether a subvention can be applied to a transaction).
Discount cannot exceed EMI scheme interest rate
The most important validation rule is that your discount value must be less than the EMI scheme's standard interest rate. The system compares the discount (whether interest discount or cashback discount) against the interest_rate field of the matched EMI scheme.
If the discount is greater than or equal to the EMI scheme's interest rate, the system returns the following error:
"Discounted Interest Can't Be More then EMI Scheme Interest"
This validation exists because a discount equal to or greater than the scheme's interest rate would result in a zero or negative effective rate, which is invalid for low-cost subventions and mathematically problematic for the EMI calculation engine.
Example: Suppose an EMI scheme from HDFC has a standard interest rate of 14%. If you configure a subvention with an interest discount of 14% or higher, the validation fails. Your discount must be strictly less than 14% -- for instance, 13.5% would pass validation.
This rule applies to both no-cost and low-cost subventions. For no-cost subventions, the interest rate is already set to 0%, so the discount represents the cost you absorb. For low-cost subventions, the discount reduces the rate from the scheme's standard rate down to your specified subvented rate.
Low-cost subventions cannot have zero discounts
For subventions with the type low_cost, an additional validation rule applies: neither the interest discount nor the cashback discount can be set to 0.0. This rule ensures that a low-cost subvention always provides a meaningful reduction.
If you attempt to save a low-cost subvention with a discount value of 0.0, the system returns the following error:
"Discounted Interest can't be 0.0 for Low Cost Subvention."
This rule does not apply to no-cost subventions. In a no-cost subvention, the interest rate is forced to 0% automatically, so the discount values have a different meaning -- they represent the cost absorption mechanism rather than a rate reduction.
If you need a subvention with zero discount values, use the no-cost type instead, where the system handles the zero-rate logic automatically.
Discount reduces effective interest rate
When a discount passes validation, the system calculates the effective interest rate that the customer pays. The calculation is straightforward:
effective_interest_rate = EMI scheme interest_rate - discount
For example, if an EMI scheme has an interest rate of 14% and you configure an interest discount of 6%, the effective interest rate is 8%. The customer sees 8% as the interest rate at checkout, and their EMI installments are calculated using this reduced rate.
This effective rate is what drives the customer-facing EMI breakdown. The customer sees the reduced monthly payment amount, the total interest saved, and the effective rate -- all derived from the discount you configured on the subvention.
The effective interest rate calculation uses the EMI scheme's interest_rate as the baseline. Different EMI schemes from different issuers may have different standard rates, so the same discount value can result in different effective rates depending on which scheme the customer selects.
Subvented Interest Rate Calculation
The subvented interest rate is the core output of the subvention calculation. It determines what the customer pays and what you absorb. The calculation logic differs by subvention type.
No-cost calculation
For no-cost subventions, the subvented interest rate is always 0%. The system sets this value automatically when the subvention type is no_cost. You cannot override or manually adjust this rate. Every EMI transaction that matches a no-cost subvention will have a 0% interest rate applied, regardless of the EMI scheme's standard rate.
The merchant absorption equals the full EMI scheme interest rate. If the scheme charges 14%, you absorb the full 14%.
Low-cost calculation
For low-cost subventions, the subvented interest rate is the value you specify during creation. This value must be greater than 0% and must result in a meaningful reduction from the EMI scheme's standard rate.
The rate you set directly determines the customer's EMI pricing:
- Customer pays: the subvented interest rate you specified.
- Merchant absorbs: the difference between the EMI scheme's standard rate and your specified rate.
- EMI installment amount: calculated using the subvented rate applied to the principal amount over the selected tenure.
For example, if the EMI scheme's standard rate is 15% and you set the subvented rate to 7%, the customer pays 7% interest and you absorb 8%. The customer's monthly installment is lower than the standard EMI option, making the purchase more affordable.
Effective rate calculation
The effective rate is the final interest rate the customer experiences at checkout. It is derived from the EMI scheme's standard interest rate minus the applicable discount:
- For no-cost subventions: effective rate = 0% (always, regardless of discount values).
- For low-cost subventions: effective rate = EMI scheme interest rate - discount.
The effective rate drives the checkout display. Nimbbl's checkout (powered by Sonic) shows the customer the effective monthly payment, total interest amount, and total payable amount -- all calculated from the effective rate. When a subvention applies, these values reflect the reduced rate rather than the EMI scheme's standard rate.
When planning subventions, work backwards from the effective rate you want customers to see. Determine the target rate, check the EMI scheme's standard rate, and set your discount as the difference. This ensures you control costs precisely while delivering the intended customer experience.