The account aggregator system in banking has kicked off with eight of India’s largest banks, including HDFC Bank, ICICI Bank Axis Bank. When fully functional, the system can make lending wealth management a lot faster cheaper. Mint explains:
What are account aggregators?
Account aggregators are entities licensed by the Reserve Bank of India (RBI) to collect share financial information. When you apply for a bank loan, you can ask an account aggregator to collect information about all your bank accounts or other assets submit it to the lender. This can establish your eligibility for the loan. Since the account aggregator sources information directly from a financial institution, it will be considered authentic the lender does not need to worry about fake documents. All of this is done electronically, reducing cost time taken for physical paperwork.
How does the system work?
The account aggregator system has three components: Financial Information Users (FIUs), Financial Information Providers (FIPs), account aggregators. The FIU requests the data, the FIP provides it, the aggregator is the intermediary acting under your instructions. You sign up on the aggregator’s platform link your bank accounts other financial records to it. Thereafter, you authorize third parties who are on-boarded as FIUs to fetch the information for the purpose you have in mind. For example, your wealth manager can be an FIP it might need to get quarterly statements of all your investments.
What will the new system cost you?
The aggregator can either charge you or the FIU (data user) in question. The costs will be determined by each aggregator individually. However, due to the online nature of this system, they are likely to be low. In some cases, they might cut down on charges that you already have to bear when it comes to information verification. Take loan processing charges, for example.
What about privacy consent?
The idea behind the new system is to enable you to give informed consent for data sharing. It will allow you to share specific information for a specific period. For example, you authorize the aggregator to share your bank account statement for a particular account for the last three years with a lender. The information being shared will be limited to that bank account the time period mentioned. You will also have redressal options in case your information is shared without your consent.
Where is this system headed?
Although it is currently confined to areas under four regulators—RBI, Sebi, Irdai PFRDA, talks are on to add more sources of information such as goods service tax income tax. These can help with areas like loan approval wealth management. For instance, a tap of the finger could allow the aggregator to share your verified income tax returns with a bank which you have approached for a loan. Eventually, even documents like covid-19 vaccination certificates could become part of the system.
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