NBFC Account Aggregator License (NBFC-AA)
NBFC Account Aggregators are entities that enable sharing of data from across multiple financial sector organizations and act as “consent brokers”, i.e., they intermediate data transfer among the financial organizations with the consent of the user. This was announced by the RBI in September 2016 stating master directions for a new class of NBFCs called Account Aggregators.
What does Account Aggregation Mean?
Account Aggregation is the accumulation of financial data that involves gathering of information on a single platform from varied accounts such as bank accounts, investment accounts, business accounts, consumer accounts and other related financial accounts.
Account Aggregators are financial entities that provide structured financial data sharing from Financial Information Providers (FIP) to Financial Information Users (FIU). For transfer of this information, consent is taken from the users. This right of managing and revoking the consent lies with the users.
Financial Information Providers (FIP): These are financial entities that provide account information of a user upon request of another entity/individual and are regulated under the financial sector.
Financial Information Users (FIU): These are entities that require or take information of certain user(s) from the FIP for multiple uses such as market assessment, customer analysis, etc. This includes both organizations and individuals. These are regulated under statutory bodies like RBI, SEBI, IRDA and PFRDA.
The Financial Information is shared in accordance with the master direction issued by the RBI-DNBR (Department of Non-Banking Regulations).
What Constitutes Financial Information?
As per the master directions of RBI-DNBR, financial information shall include:
- Various kinds of Bank deposits
- Certificate of Deposit
- Equity Shares
- Collective Investment Scheme (CIS) Units
- Infrastructure Investment Trusts Units
- Real Estate Investment Trusts Units
- Deposits with NBFCs
- Commercial Paper
- Tradable Government Securities
- Mutual Fund Units
- Indian Depository Receipts
- Units of Alternative Investment Funds (AIF)
- Balance under the National Pension System (NPS)
What are NBFC Account Aggregators?
NBFC Account Aggregator is a financial entity which works as an account aggregator for the customers of the NBFC. The NBFC-AA provides information regarding multiple accounts that are held by the customers in different NBFC entities. The customer account information will be in the form of consolidated, organized and retrievable data that would reveal the financial engagement of the customer in different NBFC products like mutual funds, insurance, etc.
What is the Importance of NBFC-AA?
The NBFC-AA provides the customers with specific information of their investments in various assets. Mostly, customers have a vague idea of their financial assets’ holdings such as mutual funds, insurance, fixed deposits, pension, etc. Therefore, NBFC-AA is relevant to users.
- The financial information of users will be available at a common platform in a standard format, thereby increasing uniformity and transparency of data.
- The provision of financial information is solely dependent on user’s consent. There are usually proper agreements between the customer, aggregator and the financial service provider. This helps prevent information-abuse.
- The information provided by NBFC-AA is reliable since it is bound by the terms and conditions of the license that includes customer protection, corporate governance, risk management, data security, grievance redressal and audit control.
- The role of the NBFC-AA is limited to account aggregation only. However, deployment of investible surplus in investments will be permitted provided the same is not for the purpose of trading.
Consent Manager for Transferring Financial Data
NBFC-AA will provide the users with a platform to make data payments or transfer financial data of various accounts of the user to any entity that desires access to that data (FIU). The consent request of the user can be initiated by sending a request of the required financial information to the user via the NBFC-AA identifier. After the request has been sent, the NBFC-AA will ensure that the requested information is shared after the consent of the user has been obtained via the NBFC-AA app. This is quite similar to authorization of collect request in an UPI (Unified Payment Interface) application.
The data collected by the FIU can be used in offering various services to its customers such as credit facilities, personal financial services, wealth management advice, investment offers, or even the upcoming financial services such as robo banking, which is operated via artificial intelligence.
The users that get their accounts registered with NBFC-A have the sole discretion of granting or revoking the sharing of the data of the accounts held by them in any FIP. Also, the users may or may not grant the consent of their data being exported in a structured format.
How to Register NBFC-AA?
- Any company desirous of getting registered as an NBFC-AA would be required to make an application in the relevant format to the DNRB, Mumbai. The Bank has to ensure that the satisfaction of the henceforth conditions in the application:
- The company possesses the required resources and means to offer such services to the customers.
- There is necessary capital structure with the company to run the business of account aggregator.
- The company has fit and proper promoters.
- The general character of the management of the company is not detrimental to interest of the public.
- A strong Information Technology System plan has been laid out by the company.
- The leverage ratio of the company is not more than seven.
- The Account Aggregator shall be granted the certificate of registration to undertake the business in India in order to ensure that it is in public interest.
- Any other condition that may be specified by the Bank time and again, the fulfilment of which as per the Bank shall be essential to confirm that the beginning of or running of the business in India shall not be detrimental to the interest of the public.
- If the conditions mentioned above are fulfilled, the Bank may grant in-principle approval to the company for registration as an Account Aggregator.
- The in-principle approval shall be valid for twelve months from the date of granting.
- Within twelve months of granting of the in-principle approval, the company will be required to prepare the platform for technology and enter int all the other necessary legal documentations and make all the compliances relevant with the in-principle approval. The Bank will, thereafter, grant the company a Certificate of Registration if it is contented that the company is ready for the business and has made all the necessary legal compliances.
Any company that seeks registration as an Account Aggregator shall have a net owned fund of rupees two crore.
Revocation of Certificate of Registration of NBFC-AA
The RBI-DNBR can cancel the Account Aggregator’s certificate of registration if any of the following conditions is fulfilled:
- the company stops to run the business of account aggregator in India
- the company fails to fulfill any condition subject to which the certificate of registration as Account Aggregator has been issued
- It appears to the Bank that the company is no longer qualified to hold the certificate of registration
- the company violates any conditions mandatory for getting the certificate of registration
- the company fails to –
- conform with the relevant directions that have been issued by RBI
- maintain accounts or publish information or disclose financial information as per the directions of the Bank or under relevant law
- submitting its books of accounts or other pertinent documents to the Bank for inspection
Duties of NBFC-AA
The duties and responsibilities of an NBFC-AA are as follows:
- It shall deliver facilities to the customer in accordance with the customer’s clear consent.
- It has to ensure that when providing services, the same shall be supported by relevant agreement/authorization between the NBFC-AA, the customer and the FIPs.
- It will not support any transactions by the customers.
- It shall undertake relevant mechanisms for ensuring appropriate customer documentation.
- The information shall be shared only with the customer who owns it or to any other FIU as approved by the customer as per the terms and conditions of the consent.
- It shall not deal in any other business except for the business of NBFC-AA. Permission has, however been granted for disposition of investible surplus in avenues not meant for trading.
- The financial information of a consumer that has been accessed from FIPs shall not be with the NBFC-AA.
- No third-party services shall be used for taking up the business of Account Aggregator.
- It will have a Citizen’s Charter that overtly ensures the protection of rights of customers. It cannot separate from any information that has been acquired by it from the customer or on his behalf, till the time customer consents for the same.
- If there is a conflict between the financial information generated by the Account Aggregator and the financial information in the books of the FIP, the position shown in the books of FIP shall prevail.
Account Aggregators are certainly a reliable platform for sharing information digitally, contrary to the paper statements that were given by the individuals earlier. NBFC-AA have certainly reduced the risk for financial entities as the relevant data of the customers can be collected easily. However, this also means that the customers have lost real control over their financial data which could become risky and give rise to poor quality data. Therefore, the RBI needs to strengthen the regulations relating to sharing financial data digitally.
For more queries related NBFC-Account Aggregators, contact us.
Frequently Asked Questions
No, if an entity is under the regulation of another financial sector regulator and dealing with aggregation of accounts that relate to financial information of consumers of a different sector, there will be no requirement of registration under the above-mentioned process.
Yes, all the entities that have been undertaking the business of Account Aggregator shall be required to undergo registration within one month of the issuance of the above directions.
No, the entities that have applied for CoR can keep running the business of AA till the time- the application for CoR is rejected or twelve months have expired since the date of application, whichever is earlier.
No, the entity does not need to increase the net owned funds immediately. The NOF criteria of crores can be met till the time in-principle approval for grant of CoR is valid.
Till the time the in-principle approval is valid, the entity will set its technology platform, complete its legal documentations and other formalities and report all the necessary compliances to the Reserve Bank of India.