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Once the amount borrowed has been paid, one would expect the bank to have the decency to write a courteous note to the borrower saying that she/ he has fully repaid the loan amount and that there are no further dues. But unfortunately, banks do not show even that basic courtesy. And in your case, it has not even responded to your letter about removal of hypothecation! This is poor customer service. Anyway, here is what you need to do: first and foremost, write to the bank and ask for a letter on their letterhead, saying that the loan account has been closed following completion of repayment. The bank also needs to give a "No objection certificate' to the RTO removing the hypothecation.
Subsequently, you will be issued a new RC without the hypothecation. In some states/cities, you are called by the RTO once to verify the documents and the information, before giving a date for collection of the new RC. I would also suggest that you complete the formalities without falling prey to the 'agents' or 'touts' at the RTO who will promise to get this done for a price. I had borrowed Rs 4 lakh towards purchase of my car from a private bank. After I repaid the entire amount, I asked the bank to remove the hypothecation of the vehicle. But they told me that I will have to do it myself. Is it not the duty of the bank to do this? Is there anything that I can do to force the bank to do this? As I said earlier, the least that the bank can do on payment of the last instalment by the customer is to write a thank-you note informing him or her about the payment of all dues. But this is not done by the bank and the customer is expected to write to the bank seeking a 'No due' certificate. In fact, I would also expect the bank to inform the Regional Transport Officer (RTO) about it and ensure that the vehicle is released from hypothecation. But this is never done. So much so that terminating the mortgage on a vehicle becomes an exasperating task for the borrower. However, all this can change if the banking regulator intervenes and makes it mandatory for banks to complete the process of releasing the vehicle from hypothecation. The regulator could also ensure that this becomes part of the loan agreement that lending agencies have with consumers. A letter from the bank to the RTO should automatically terminate the hypothecation of the vehicle in the records of the vehicle registration authority. Banks and transport authorities can in fact sit together and work out such an arrangement. So send a complaint to the RBI and also urge the regulator to take suitable action to protect the rights of consumers on this issue. You can also get other consumers who have had similar experience with their banks to write to the Reserve Bank. It's only consumer pressure that can make the banking regulator think along these lines. The other option is to file a public interest petition before the Supreme Court, seeking a directive to the Reserve Bank of India on this.
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Four
years ago, I took a loan from a bank to buy my car. The tenure of the
loan was for three years and I paid all instalments without fail and
repaid the entire amount last year. As part of the loan agreement, the
car was hypothecated to the bank as collateral. But now even after a
year of payment of all dues to the bank, my car continues to be
hypothecated to the bank. I wrote to the bank about it but got no
response. I now want to sell my car and have to show to the buyer that
there are no liabilities. So how do I remove the hypothecation?
Once
you have this, you will have to go to the Regional Transport Office,
fill up form 35 and pay the appropriate fee to get the vehicle
released from hypothecation. You will also need to give your original
Registration Certificate (RC) and the copy of car insurance papers and
also your driving license and pollution under-control certificate.
These requirements may vary slightly from state to state.