Done with your vehicle loan? Kerala's new system will automatically clear loan details from RC

Thiruvananthapuram: An online system is being introduced in Kerala that will automatically remove loan details from vehicle records once the loan is paid off, without the vehicle owner needing to apply. The financial institution that provided the loan will inform the motor vehicle department online when the loan is fully repaid. Based on this information, the department will update the records and eliminate the loan details.

This reform is part of the digitalisation of the Vehicle Registration Certificate (RC) set to begin in April 2025. Currently, vehicle owners must submit an application along with a no-objection certificate from the financial institution to have the loan details (hypothecation termination) removed.

With the integration of financial entities into the Vaahan software, loan details will now be directly transferred, allowing for automatic removal. At present, only Reserve Bank-recognised financial institutions can access the Vaahan portal, but non-banking financial institutions that provide vehicle loans have been requested to be included as well.

The fee for removing loan details is currently Rs 85 and will be collected when the loan is recorded. If a financial institution ceases operations or merges with another, it must hand over the relevant information to the Motor Vehicles Department. The online system is being introduced to address complaints that some financial institutions and intermediaries have been misleading vehicle owners, with some institutions charging exorbitant fees for providing no-objection documents.