NEW DELHI: In a major move, cancellation of vehicle collateral will be done automatically through an online system once the loan is fully repaid, saving people the hassle of visiting transport offices and contacting banks multiple times. The Road Transport Ministry has started rolling out the new system on Monday, March 1, initially with a partnership of one state-owned bank and five non-banking financial companies (NBFCs). More will join soon.The move is aimed at eliminating procedural delays and reducing the inconvenience faced by borrowers in updating vehicle records after settlement of loans and visiting the regional transport office to initiate removal of collateral from the vehicle registration certificate. The process often involves multiple visits and a lot of paperwork.Officials said the system operates using the Reserve Bank of India’s Unified Lending Interface (ULI), which enables secure, real-time data exchange between lenders and government platforms. “The online interface interacts between the bank, ULI and Vahan systems. Therefore, the entire process, including verification, takes place without any human intervention. Once the process is completed, the owner receives an SMS from Vahan informing him/her to cancel the mortgage. This is part of the government’s initiative to improve the convenience of life,” an official said.In addition, after the car owner repays the loan, the bank will send a “No Objection Certificate (NOC)” to the car owner.Currently, SBI and five NBFCs including Cholamandalam, Shriram Finance and Sundaram Finance have started implementing the system. Officials said more banks and financial institutions will be added to the system in a phased manner to ensure wider coverage and seamless implementation across the country. The move will significantly reduce processing times and increase transparency, they added.Welcoming the move, transportation services expert Anil Chhikara said that while banks and financial institutions will handle all collateral issues while taking a loan to purchase a vehicle, these institutions will not help customers in the process of repaying the loan.
