NBFC AAs are the type of financial entities whose primary business is similar to a consent broker between financial institutions. These entities enable the sharing of financial data of prospective customers to the financial institutions to facilitate the lending of secure loans to eligible customers. The data can only be transferred or shared after obtaining consent from the user. These institutions were conceptualised by the RBI in 2015 and since then the RBI has announced master directions for these institutions.
The information shared by NBFC AA with other NBFCs is consolidated and organized. The information consists of details regarding financial statements, investments, other debts, etc. The helps other NBFCs in identifying the eligibility of the candidate for granting loans. Thus, NBFC AA helps to decrease the NPA or bad loans of other NBFCs and improves their balance sheet.
The business model contains two entities:
Financial Information User (FIU): These are the entities regulated by institutions like SEBI, IRDAI, RBI, and PFRDA. These entities could be other insurance companies, NBFCs, banks, etc.
Financial Information Provider (FIP): This entity offers financial services and gives details about the customers.
The main responsibility of NBFC AA is to consolidate financial information about any customer after obtaining their consent and then share the information with other financial institutions. Here is the list of responsibility of NBFC AA:
Here is a quick checklist of documents required to register as an NBFC Account Aggregator:
The process of NBFC Account Aggregator registration is carried out based on RBI’s master directions. These entities are not allowed to hold public funds and do not have any customer interface. Follow these steps to register an NBFC AA with RBI.
During the validity period of in-principal approval, a company must complete all the legal documentation to carry out the operations of account aggregator. The company should also make arrangements to set up a proper IT infrastructure to support its services. The following violations could lead to cancellation of in-principle approval by RBI.
Entities which are regulated by other financial sector regulators are exempted from the need to register as an NBFC-AA. Such exemption is allowed to only those entities which are involved in the aggregation of accounts of a customer of another financial sector.
Account aggregators collect information about customers’ financial assets and supply the information in a consolidated, organized, and retrievable manner on the customer’s consent. Investors would be ready to take the services of the account aggregators on their discretion.
After applying for registration, they’re permitted to hold operations of NBFC account aggregator till the CoR is rejected by the authority or twelve months from date filing of the application, whichever is earlier.
Yes, it had been mandatory for all the prevailing businesses of account aggregator to register within the amount of 1 month from the date of issue of master directions by RBI. Directions were issued by RBI on 2nd September 2018.