Markets Regulator SEBI Joins Account Aggregator Framework

The Securities Exchange Board of India (SEBI) on Friday (August 19) said it has joined the Reserve Bank of India’s (RBI’s) account aggregator framework. 

SEBI has allowed asset management companies (AMCs), depositories and other firms to operate as financial information providers (FIPs).

“The FIPs in the securities market will provide the financial information, as specified in clause 3(ix) of the RBI Master Directions, to the customers and financial information users who furnish the consent artifact through any of the Account Aggregators registered with RBI,” SEBI said in a  circular.

SEBI also noted that the financial information pertaining to the securities markets will be furnished by FIPs via account aggregators after receiving valid permission from the users.

The circular, issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, will come into effect immediately.

Further, SEBI also directed the FIPs to enter into a contractual agreement with account aggregators (AAs) to specify the rights and obligations of each party and modalities of dispute resolution mechanism.

Apart from this, the FIPs have also been entrusted to ensure the verification of the validity of the user consent, its usage and the credentials of the AAs.

The market watchdog also ordered the FIPs to deploy scalable information technology (IT) solutions to ensure secure workflows to the AAs. It also asked the information providers to build adequate safeguards in the system to curb any unauthorised access and ensure protection from cyber attacks.

“There shall be adequate safeguards built in IT systems of FIPs in the securities markets to ensure that it is protected  against unauthorised access, alteration, destruction, disclosure or dissemination of records and data,” the circular said.

The Account Aggregator Framework

Account aggregation involves compiling financial data from multiple sources all at one place. This will enable collection of financial data from multiple inputs, ranging from loans to investments, at one place to ensure seamless sharing of information with financial institutions and service providers. 

It aims to ensure quick sharing of data with explicit permission of users, all while eliminating the need for paperwork. 

In this framework, AAs will act as an intermediary and the information will come from FIPs such as banks and AMCs and will be subsequently forwarded to financial information users (FIUs) that request the data. The framework aims to streamline financial inclusion, especially in the lending space.

According to Inc42, India’s overall fintech opportunity is estimated to surge to $1.3 Tn by 2025, led largely by the lendingtech, which is likely to account for 47% or $616 Bn of the total market.