The NBFC Account Aggregator framework came into existence in 2016, wherein the account aggregators facilitate data allocation from various financial sector entities and act as a consent broker. It involves transit of data among the financial organizations but only after getting the approval from client. The RBI had issued master directions for the same. Let’s discuss more on NBFC AA License.
The need for NBFC AA License
Collecting scattered data and consolidating it, and submitting to a financial institution while applying for a loan, can prove to be a time-consuming as well as confusing job for an individual. Hence the concept of NBFC AA was introduced to help people get a consolidated view of their financial holdings that is spread across different financial sector regulators.
Before we understand the process of obtaining NBFC AA License, we need to understand certain terms:
These are financial entities providing financial data allocation from financial information providers to financial information users. The consent of the client is a must.
- Financial Information Providers-
These are entities that provide the financial information of a customer on receiving a request from another entity.
- Financial Information Users
These are the entities that collect information of the users from the providers for market evaluation, customer analysis, etc. This includes both organizations and individuals. These are regulated by regulatory authorities like, SEBI, IRDA, RBI and PFRDA.
What includes Financial Information?
As per the RBI master directions, financial information includes the following:
- Different kinds of bank deposits;
- NBFC Deposits;
- Real Estate Investment Trusts Units;
- Mutual funds units;
- Units of AIFs;
- Tradable Government Securities.
How to obtain NBFC AA License?
- The company applying for NBFC Account Aggregator License should have a net owned fund of 2 crore rupees.
- The company should have the resources required to offer such services;
- The company should have adequate capital structure;
- The company must be having fit and proper promoters;
- The management of the company should be such that its general character must not be prejudicial to public interest;
- An effective IT system plan should be laid by the company;
- The leverage ratio of such company should not be beyond 7.
- The company applying for NBFC AA Licence should make an application to the RBI. Such an application should be as specified in annex 1 of RBI Master Direction;
- Once the RBI is satisfied that the company fulfils the eligibility requirements prescribed above, it shall grant in-principle approval;
- The in-principle approval is valid for 12 months, and within this period, the company is required to put up a technology platform and enter into legal documentation that is needed to be prepared for operations and report compliance position to the Bank;
- When the Reserve Bank is satisfied that the company can commence operations and is in compliance to the registration requirements, it shall grant the Registration Certificate as an NBFC Account Aggregator.
When can the NBFC AA License be revoked?
RBI can cancel the registration of the NBFC AA in case of any of the following circumstances:
- The company closes account aggregators’ business;
- Where the company is unable to satisfy any condition to which the certificate of registration has been issued;
- In case where the bank feels that the company can no longer hold COR;
- The company breaches a condition mandatory for obtaining COR;
- Where the company fails to maintain accounts or issue information or disclose information as required by banks;
- Where the company fails to submit its books of accounts or other documents for assessment purposes.
What is the responsibility of NBFC AA?
The responsibility of NBFC AA is laid down below:
- It shall deliver services to customers based upon customer consent;
- It shall not hold up any customer transaction;
- It shall not contract in a business except for the business of NBFC AA. However, it should be noted that the permission has been granted for disposition of investible surplus in avenues not meant for trading;
- The information must be shared only with the customer who owns it or to other FIU as sanctioned by the customer according to the terms and conditions of the consent;
- It shall have a citizens’ charter that provides for protection of customers’ rights.
Consent is essential in the business of an NBFC-AA. Without the consent of the customer, NBFC-AA can neither retrieve, nor share or transfer any financial data of the customer. The concept of NBFC AA was introduced to help people get a consolidated view of their financial holdings that is spread across different financial sector regulators. With NBFC AA License, the credit approval and sanction process for lending becomes much more efficient.
Read our article:NBFC Collaboration with the Financial Entities