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The account aggregator system in banking has kicked off with eight of India’s largest banks, including HDFC Bank, ICICI Bank and Axis Bank. When fully functional, the system can make lending and wealth management a lot faster and cheaper. Mint explains:

What are account aggregators?

Account aggregators are entities licensed by the Reserve Bank of India (RBI) to collect and 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 and 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 and the lender does not need to worry about fake documents. All of this is done electronically, reducing cost and 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), and account aggregators. The FIU requests the data, the FIP provides it, and the aggregator is the intermediary acting under your instructions. You sign up on the aggregator’s platform and link your bank accounts and 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 and it might need to get quarterly statements of all your investments.

The new framework
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The new framework

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 and 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 and 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 and PFRDA, talks are on to add more sources of information such as goods and service tax and income tax. These can help with areas like loan approval and 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.


Neil Borate

Neil heads the personal finance team at Mint. A former colleague called them 'money nerds' and that's what they are. They cover topics like mutual funds, taxation and retirement, all to improve your chances of building wealth. Neil graduated with a degree in law and economics. He passed the CFA Level I exam and began his writing career at Value Research, a mutual fund research firm in 2016. He joined the personal finance team Mint in 2019. Everyday, the Mint Money Team tackles personal finance questions such as where to invest and where to borrow, through articles, charts and reader queries. They also have a daily podcast - 'Why Not Mint Money' and an annual ranking of mutual funds - the Mint 20.
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