Overview of NBFC Account Aggregator License
Account Aggregators are such kind of entities which acts as a consent broker that enables sharing of the financial data among the financial institutions in the financial sector. Hence, Account Aggregation is the gathering of all the financial data that includes assembling of all the information on a single platform from different accounts like the investment accounts, bank accounts, consumer accounts, business accounts and other related financial accounts.
Account Aggregators are the financial organizations that grant structured allocation of financial data from the Financial Information Providers to the Financial Information Users. For transmitting this information, the approval request is taken from the users. The right of administering and revoking the assent lies with the users.
NBFC Account Aggregator License
What is NBFC Account Aggregator?
NBFC Account Aggregator is that financial entity which functions as the Account Aggregator for the customers of NBFC. NBFC-AA accumulates and provides information concerning multiple accounts which are held by the customers in various NBFC entities. The information of the customer account information will be in the form of organized, consolidated and retrievable data that would reveal the financial engagement of the customer in different NBFC products like mutual funds, insurance etc.. This was conceptualized by the RBI in the year 2015. For Non-Banking Finance Companies - Account Aggregators (NBFC-AA), RBI has declared master directions.
NBFC-AA (NBFC Account Aggregator) is a kind of budgetary element which is involved in the process of giving data to NBFC clients identified with accounts held by clients in various NBFCs. Such data will be in a united and sorted out way. The data will be related to the financial involvement of the customer with the various products of NBFC.
For Your Better Understanding Let Us Clarify The Importance Of Both The Terms:
- Financial Information Provider (FIP):
These are those financial organizations that grant user’s account information upon the request of another individual or organization and are harmonized under the financial sector.
- Financial Information User (FIU):
These organizations need information regarding the users from the FIP for many purposes such as customer analysis, market evaluation, etc. This includes both individuals and organizations. These entities are regulated by the financial sector regulators such as RBI, IRDA, SEBI, PFRDA.
- The sharing of the Financial Information has to be according to the direction issued by the RBI-DNBR.
What constitute the Financial Information?
Financial Information consists of the following information:
- Deposits with NBFCs
- Structured Investment Product (SIP)
- Commercial Paper (CP)
- Certificates of Deposits (CD)
- Government Securities (Tradable)
- Equity Share
- Bonds Debentures
- Mutual Funds
- Exchange Traded Funds (ETF)
- Indian Depository Receipts
- Collective Investment Schemes (CIS)
- Alternative Investment Fund
- Insurance Policies
Benefit of NBFC Account Aggregator
- The principle function of the NBFC-Account Aggregator is to give data with respect to the accounts held by clients. Data is held in a sorted, merged and retrievable way. For a client, it is totally purposeful to enjoy the services of the account aggregator.
- The NBFC-AA performs IT-oriented activities which imply that client will get advanced data. The primary job of NBFC-AA (NBFC Account Aggregator) is collection of account and in this way they will not go into the monetary resources exchange with its clients, unlike other NBFCs. An aggregator is allowed to convey investible surplus in instruments and not for exchanging. Board-affirmed approach of the record aggregator will choose the estimating of administrations. Such rules and approach embraced by the account aggregator must be transparent and accessible in the public space.
- The administrations rendered by the NBFC-AA (NBFC Account Aggregator) must ensure regarding the suitability of understanding between the aggregator, client and financial service provider. The terms and states of the permit must be followed by NBFC-AA (NBFC Account Aggregator) like insurance of client, corporate governance, complaint redressal, data security, audit control, and risk management framework. The Financial Stability and Development Council (FSDC) support the function of NBFC-AA.
- Absolutely, NBFC-AA (NBFC Account Aggregator) gathers data in regards to the client's monetary resources and gives it to the clients in a sorted, merged and retrievable way. The set of rules drafted by the RBI which must be tracked by them properly.
Requirements for NBFC-AA Registration
- There is a minimum requirement of Rs. 2 crore for NBFC-AA (NBFC Account Aggregator) license. Nonetheless, the company will be having a time period of 12 months after obtaining the principle approval of RBI for the purpose to raise money. No other services can be provided by NBFC-AA (NBFC Account Aggregator) other than for account aggregation.
- After receiving the approvals from the regulator, NBFC-AA will have time duration of 12 months to set up all the essential technologies and tie-ups that are compulsory to carry out the business of aggregation.
- NBFC-AA will give information to the financial user concerning the customer. NBFC-AA is not competent to do fund based activity like the other NBFCs. Prima facie it cannot be considered as NBFCs. NBFC Account Aggregators cannot use the information of the customer’s financial assets for any different purpose.
- According to RBI, an entity which is involved in aggregating accounts of a particular financial sector which is regulated by the other regulators can be given exemption from obtaining RBI’s approval. These types of entities are not permitted to carry financial activities like other NBFCs.
Duties and Responsibilities of NBFC Account Aggregators
The prime obligation of the NBFC-AAs is to gather data of any client under explicit assent and disperse such data.
The Accompanying Duties and Responsibilities of the NBFC-AAs (NBFC Account Aggregators) According To the Directions Provided By The RBI:
- It shall deliver amenities after acquiring the customer’s assent.
- To ensure that the services provided is exactly the same as provided in the agreement as between the NBFC-AA and the customer.
- Acquire the in principal approval to deliver such activities
- Strategy for appropriate client identification;
- For the protection of client's rights set out Citizen's Charter; and
- Protect financial information and data about the customers.
- To ensure that no data is leaked or retrieved without the consent of the client
What are the Fit-in Criteria for Promoters according to RBI?
- To draft a strategy for confirming the fit and appropriate criteria of promoters.
- The strategy will be totally founded on the rules provided by RBI.
- A declaration statement will be obtained from the directors, managing directors and CEO according to the format as has been given under the directions.
- An agreement deed shall be obtained by the directors, managing directors and CEO according to the format as prescribed under the directions.
- Provide yearly explanation on change of directors, managing director and CEO as duly certified by the Statutory Auditors concerning the fit and proper standards within 15 days from the financial year’s closure.
What is the Process of NBFC Account Aggregator Registration?
NBFC-AA registration is done on the basis of directions given by the RBI. This kind of entity will not have any public fund or any sort of interference by the client.
For NBFC-AA (NBFC Account Aggregator) Registration the following Steps Should Be Embraced:
- The primary step is the registration of Company according to the Companies Act, 2013.
- The organization must have the essential resource to offer such type of services.
- To undertake the matter of account aggregator, the Company had to be prepared with the appropriate plan regarding adequate capital structure.
- The common character of the management should not be biased for any public interest.
- It is compulsory to get Certificate of Registration (CoR) from RBI for the activities of account aggregator.
- For obtaining the Certificate of Registration (CoR), it is required to make an application to the RBI by the applicant.
- There is a minimum requirement of at least Rs. 2 crore.
- Equipped with the system of information technology and data innovation framework so as to conduct services related to account aggregation.
- The leverage ratio must not be more than 7 times.
- Promoters of the NBFC-AA must be fit and legitimate.
What needs to be done by the NBFC-AA (NBFC Account Aggregator) during the validity period of in-principle approval?
During its validity period, the organization will make plan for information technology and data innovation platform and complete all the legal documentation which is important to do activities. Though, on account of Non-Compliance, RBI may cancel the CoR of the NBFC-AA :
- If the Company stops to carry out the activity of account aggregation,
- The Company is not following the guidelines of the RBI because of which the certificate of registration has been given.
- If it is discovered that NBFC-AA (Non-Banking Financial Company-Account Aggregator) is no more qualified to hold the certificate of registration; or
- Any breach of the condition by the Company that is mandatory to obtain a Registration Certificate.
- Not following the directions given by RBI; or
- Non- Maintenance of the accounts;
- The Company failed to disclose and publish its financial situation as per the directions of bank;
- Company fails to submit its books of accounts for investigation to the bank.
Norms for Data Security by NBFC-AA
It is obligatory for NBFC-AA to have an IT framework as they carry abundance of financial information about different clients. These kinds of entities shall be exclusively responsible for the secured storage and transfer of financial information from the financial information providers to the financial information users. They would need to ensure that the credentials of customer cannot be stored or retrieved in their system.
- Protected from any unauthorized access, disclosure, alteration, destruction or dissemination of the date and records.
- Utilize the technological platform to keep update all the financial information;
- Take required actions to manage the risk.
- Information System Audit by external auditor who is a CISA certified.
According to our opinion, RBI has taken an excellent step to direct and regulate such entities. For this, RBI has introduced the Guidelines on NBFC Account Aggregators rules in the year 2016. Though, it is not desirable to call them NBFCs as they are not working or providing any financial activity.
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Frequently Asked Questions
Record aggregators gather data about clients' money related resources and give the data in a united, sorted out and retrievable way based on the guidelines of the client. Financial specialists would have the option to take the administrations of the record aggregators on their own circumspection.
Truly, it was required for all the current organizations of record aggregator to apply for enlistment inside the time of one month from the date of issue of ace bearings by RBI. Bearings were given by RBI on second September 2018.
The RBI is enabled to take care of the action of record aggregators and guarantees that exercises are in similarity with the recommended guidelines.
Elements which are managed by other monetary area controllers are excluded from the prerequisite of NBFC-AA. Such exclusion is permitted to just those elements which are engaged with collection of records of a client of another money related area.
No, it isn't obligatory to expand the constraint of NOF up to Rs. 2 crores before applying for enlistment, be that as it may, the organization needs to meet the rules of NOF of at least Rs. 2 crores inside the time of a year from acquiring a CoR by RBI.
Subsequent to applying for enlistment, they are allowed to convey tasks of NBFC account aggregator till the CoR is dismissed by the power or a year from date recording of the application, whichever is prior.
Organizations enrolled or directed by any of the 4 controllers – Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) can be a FIP or FIU.
No, players managed by Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) are not ordered to be a piece of AA environment. Be that as it may, the upsides of being a piece of AA will probably drive a draw based choice to join the AA biological system.
FIU means "Financial Information User'. A FIU expends the information from a FIP to offer different types of assistance to the end shopper. For example a loaning Bank needs access to the borrower's information to decide whether a borrower meets all requirements for an advance. The loaning Bank is the FIU. Banks assume a double job – both as a FIP and a FIU.
Presently only assets based information is accessible (ledgers, stores, shared assets, protection strategies, annuity reserves). Other information types are probably going to be included after some time.
NBFC and bank both are monetary organizations. However, the significant distinction is not normal for banks NBFC cannot give self drawn checks and demand draft. NBFC represents non banking budgetary organization as the name recommends NBFC isn't a bank, perform just loaning capacities to open and NBFC can't acknowledge stores from public.
Account Aggregator works by arranging data from various records which may incorporate financial balances, credit card accounts, venture accounts, and other shopper or business accounts.