Over 50% of phone purchases in smaller cities use EMI as price hikes bite

EMI penetration in Tier 2 smartphone purchases rose to 57.5% in Q2 2026 as brands extended financing tenures and higher prices pushed affordability to the centre of demand, according to Counterpoint

Tier 2 markets have emerged as the most financing-driven segment for smartphone purchases, according to Counterpoint Research's Monthly Smartphone Financing Tracker. Equated monthly instalments (EMIs) in Tier 2 markets accounted for 57.5 per cent of smartphone purchases in the mainline channel in the second quarter of calendar year 2026, up 13 percentage points from 44 per cent in the same quarter last year. Tier 3 and smaller markets also crossed the halfway mark, with financing penetration rising to 55 per cent, up five percentage points year-on-year.

 

Tier 1 markets, by comparison, saw financing penetration increase more modestly, from 37 per cent to 41 per cent.

 

 

Prachir Singh, senior analyst at Counterpoint Research, said the strongest momentum continued to come from Tier 2 and smaller markets. He attributed the trend to the expanding reach of non-banking financial company (NBFC) financing in non-metro India, rising consumer aspirations to upgrade to more expensive devices, and a wider range of affordability programmes from brands and retailers. 

Premium brands stretch financing tenures

Counterpoint's report also shows a clear split by brand. Apple recorded the highest average financing tenure among smartphone makers at 17.2 months, well above the market average and reflective of the higher prices of its devices in India.

 

Samsung followed at 11.4 months, with Oppo at 9.9 months, Vivo at 9.8 months, Realme at 8.9 months and Xiaomi at 8.5 months.

 

In terms of units financed, Samsung continued to lead the market, followed by Vivo and Apple, according to Tarun Pathak, research director at Counterpoint Research. Pathak said the role of smartphone financing has moved beyond simply offering longer EMI tenures and is now central to making monthly ownership affordable.

 

Brands and financing partners are responding with plans extending up to 30 months to keep instalments manageable even as device prices rise.

 

Samsung has already introduced a 30-month no-cost EMI option for its latest Galaxy Z series foldables in India. Apple, meanwhile, continues to rely on bank cashbacks and no-cost EMI offers across its retail and online stores in India, while testing a lease-based upgrade programme in the US.

 

Faisal Kawoosa, founder and chief analyst at Techarc, had earlier told Business Standard that the shift towards longer tenures was a direct response to record smartphone prices.

He pointed out that India now has 24 models priced above Rs 1 lakh and more than 40 models priced between Rs 50,000 and Rs 1 lakh, making longer EMI tenures a practical necessity rather than a convenience.

 

Kawoosa expects financing to expand beyond the premium segment as prices rise across tiers, though he flagged the sub-Rs 15,000 segment as a challenge because many buyers lack a formal credit history or CIBIL score required to qualify for financing.

Why smartphone financing is rising now

The financing push comes as the market shrinks in volume even as prices climb.

 

India's smartphone shipments fell 11.1 per cent year-on-year to 33.2 million units in the April-June quarter of 2026, according to International Data Corporation (IDC), following a 4.1 per cent decline in the first quarter.

 

Total shipments in the January-June period stood at 64.2 million units, down 7.9 per cent year-on-year and the lowest first-half volume in five years, even as the overall market value increased 3.6 per cent.

 

Vivo and Samsung retained the top two positions by shipments, while Apple increased its share to 8.5 per cent despite slipping in rank.

 

The iPhone 17 was the highest-shipped smartphone model in the country during the first half of the year.

 

IDC noted that financing offers from companies such as Apple and Samsung could narrow the effective price gap between premium devices and lower-priced segments, helping sustain demand at the higher end even as the overall market contracts.

 

Aditya Rampal of IDC said financing would be important in keeping affordability within reach heading into the festive season, alongside product differentiation in the mid-premium segment.

Financing could account for 42% of 2026 smartphone sales

Counterpoint expects financing, driven by NBFCs as well as credit and debit card EMI options, to account for 42 per cent of total smartphone sales in India in 2026.

 

The report also identifies the festive season as a key test for this trend.

 

With brands shifting emphasis from outright discounts towards affordability-led offers, longer EMI tenures, flexible repayment structures and trade-in programmes are expected to play a central role in generating demand over the coming months.

 

A regulatory change is also expected to shape how lenders manage financed devices.

 

The Reserve Bank of India (RBI) has finalised a framework governing when and how banks, NBFCs and other regulated lenders can remotely restrict the functions of smartphones, tablets or laptops bought on credit.

 

The rules will take effect from January 1, 2027.

 

Sumit Kumar of Counterpoint Research said the framework is expected to strengthen the lending ecosystem by giving banks and NBFCs greater confidence to extend credit for devices while protecting borrowers from arbitrary or coercive recovery practices.

 

For an industry increasingly dependent on financing to sell premium and ultra-premium smartphones, that added confidence could become as important as longer EMI tenures. 

What the RBI's new device-locking rules say

The RBI framework was developed through two rounds of draft amendments this year before being finalised.

 

Under the rules, a lender cannot lock a financed device immediately after a missed EMI.

 

Restrictions can be imposed only after a graduated process, triggered after the loan remains overdue for a defined period and after the borrower receives prior notices and an opportunity to repay.

 

Even when restrictions are imposed, lenders cannot block incoming calls, text messages or emergency SOS functions.

 

The device must also remain usable where it is needed for the borrower's work or livelihood.

 

Any restriction must be linked specifically to the loan taken for that device. A lender cannot use device locking to recover an unrelated debt or restrict a smartphone that was not itself financed.

 

The RBI has also included privacy safeguards.

 

Lenders are barred from accessing information stored on a borrower's device, such as contacts or files, for recovery purposes.

 

Any device-locking technology used by lenders or their partners must also be certified by the device manufacturer or operating system platform where such certification is available.

 

Consent for such restrictions must be clearly obtained when the loan is taken and cannot be buried in general terms and conditions.

Longer EMIs could stretch replacement cycles

Kawoosa noted that longer EMI tenures could also influence replacement behaviour.

 

Most consumers are unlikely to make another smartphone purchase until their existing EMI obligations are over, he said.

 

This could stretch upgrade cycles further, with buyers potentially holding on to smartphones for five to seven years instead of the three-to-five-year cycle that has become common.