The Reserve Bank of India launched the Account aggregator (AA) Framework in September 2021. The Account Aggregator framework is a financial data-sharing system aggregating a customer’s financial information at a single portal and facilitating the consented flow of data between regulated entities (Banks and NBFCs). It empowers customers to digitally access and control their financial records and eases the process of data sharing and exchange with financiers. 

This framework sets the tone for Open Banking in India, and it’s a reliable, transparent, and efficient platform for consent-based data sharing amongst regulated entities. The context to launch AA framework was the premise that the customer data available in the database of banks and financial institutions, insurance companies, and government entities is currently scattered and could be valuable if integrated and made accessible seamlessly. To enable secured and seamless data sharing with the lending institutions, licensed account aggregators are permitted to collate customer’s financial information such as bank statements, income tax returns, GST returns, stamped documents from notaries and facilitate secure exchange.

The launch of the AA framework will speed up the process and reduce the cost of lending and wealth management for individuals. 

What is an Account Aggregator?

An account aggregator is an RBI regulated non-banking financial company (NBFCs) offering services to consolidate a customer’s financial information and share it with other financial institutions within the AA network in exchange for a fee. However, the consent of the customer is mandatory before sharing financial information.

How does it work?

AA framework comprises an Account aggregator, a Financial Information Provider (FIP), and Financial Information User (FIU).

FIP is a databank of the financial information about a customer. It might include banks, NBFCs, Government organisations or insurance repositories. FIU is a lending institution utilising the data possessed by a FIP to provide services to customers. For example, while sanctioning a loan, a Bank (FIU) will access the borrower’s financial information from a FIP to judge the client’s creditworthiness. The role of the account aggregator is to facilitate consent-backed data exchange between the FIP and FIU.

Firstly, an individual or business owner opens an account with a preferred account aggregator. Secondly, the customer shares consent to the lending institution (FIU) to access their data through the account aggregator. Thirdly, the account aggregator seeks the necessary financial information through APIs from FIPs, and the encrypted data is securely transmitted from the FIP to the FIU for their perusal.

Account Aggregator Framework

Additional Read: What is the Difference between Term Loan and Working Capital Loan?

What data can be shared?

The AA network permits sharing the customer’s financial information such as bank deposits, equity and mutual fund investment details, income tax returns, GST returns, bank statements, and pension funds to any lending institution. It encapsulates a list of 19 categories under the head’ Financial Information’ and some other categories of financial importance. 

Does the AA have the authority to see or store data?

The financial information shared through AA is strictly confidential and transmitted in an encrypted format. The AAs are not authorised to see or store the financial data transmitted through it. Further, the account aggregators are not allowed to utilise third-party services to carry out the business of account aggregation.

Additional Read: Channel finance or working capital loan

The need for Account Aggregators.

Digitisation and the evolution of the AA framework streamline the consolidation of financial data and give individuals complete control over their data access, storage, and exchange. With the AA framework, customers can grant access or revoke based on their requirements and stay in control of the visibility of private and confidential financial information. 

AAs will also aid the financial inclusion of cash-starved MSMEs by giving financial institutions an enlarged view of their financial profile within seconds of receiving the borrower consent. With better visibility of the MSMEs financial information, MSMEs are placed in a better position to access formal means of financing. It has also widened the pool of customers for lenders with access to a large set of financial information to assess the client’s creditworthiness.

The ultimate goal of the Account Aggregator framework is to accelerate the loan evaluation process, facilitate tamper-proof secure data sharing, and reduce the prevalent financial information asymmetry. Want to know more about how your data is used? Reach out to your Tata Capital Relationship Manager for further assistance. 

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