The auto industry and vehicle loan financers have both warned that frauds in the resale of vehicles may rise with the Delhi Government’s August 27 notification ordering removal of hypothecation from the registration certificate (RC) of new vehicles.

Hypothecation on RC

Hypothecation on the RC (or smart card) mentions that the car has been purchased under an auto loan — an important detail for a second hand buyer to be aware of.

“Financing is significant for the growth of the industry, with over 70 per cent of cars being bought through loans today. Such a move works against us, as if the lenders reduce lending, it will hamper the growth of the auto industry,” Sugato Sen, Senior Director at the Society of Indian Automobile Manufacturers, said.

Non-Performing Assets

The issue is of critical importance given that the National Capital Region represents the largest car market in the country.

An increase in frauds will translate into a rise in Non-Performing Assets, or bad loans for banks and non-banking financing companies lending to the sector.

Raman Aggarwal, President of Delhi Hire Purchase & Leasing Companies Association and Senior Vice-President at SREI Equipment Finance, has asked the Delhi Government to withdraw the notification.

“The prime objective of having the hypothecation details printed on the RC is to make it publically known that the financer has a legally valid stake in the vehicle. Such an arrangement is often referred to and used for many purposes like resale of the vehicle where NOC from the financier is required,” he said in a letter to the Principal Secretary (Transport) of the Delhi Government.

He added that the printing of Lease/HP/Hypothecation details hold immense value and importance, not only for the stakeholders, but also for the continued growth of the rood transport sector.

roudra.b@thehindu.co.in

(This article was published in the Business Line print edition dated September 20, 2012)
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