What is no-cost EMI, and who pays for it?
Somebody is paying the interest. The entire design is arranging for it not to be you, visibly.
The restaurant is not giving away free dessert. It has decided that the dessert costs less than the extra people it brings in, and it has priced the main courses accordingly.
The shop accepted less than you paid. The gap is the interest, and it was priced in before you saw the offer.
Follow the discount and you find the interest
A phone costs 60,000 rupees. You are offered no-cost EMI over six months, paying 10,000 a month. The bank issuing that credit does not lend for nothing, so interest is charged somewhere.
What typically happens is that the merchant offers the bank an upfront discount roughly equal to the interest. The bank is made whole, you pay only the sticker price in instalments, and the merchant has effectively bought your conversion by giving up margin.
Why merchants do it happily
Because instalment offers reliably increase both conversion and basket size. A price that felt impossible at 60,000 feels manageable at 10,000 a month, and buyers upgrade to more expensive models when the monthly figure stays similar. The margin given up is often less than the additional revenue generated.
This is the same logic as buy now, pay later globally: the merchant pays a fee well above card rates and pays it willingly, because instalments sell.
Where it stops being free
Three places, and they are worth knowing before you accept.
Processing fees are sometimes charged separately and are genuinely yours to pay. Cancellations and returns get complicated, because the credit exists independently of the purchase and unwinding it is not automatic. And late payments attract charges and interest at ordinary rates, which is where a genuinely good deal turns into an expensive one.
There is also a quieter cost: the instalment amount usually occupies a portion of your credit limit for the full term, reducing what is available to you elsewhere.
Where you meet it
Every electronics purchase, every "pay in 4" button at checkout, every festival sale offer. The question that cuts through all of them: if this credit is free to me, who paid for it, and what did they buy with that payment?