Four major financial regulators have come together to create a non-profit organization that will make it easier for users to apply for loans by helping them share their data with different agencies.
Sahmati – announced by the Reserve Bank of India (RBI), the Securities and Exchanges Board of India (Sebi), the Insurance Regulatory and Development Authority of India (Irdai) and the Provident Fund Regulatory and Development Authority (PFRDA) – will regulate entities under the four regulators to share data with a user’s consent.
For example, if you approach a bank for a loan, the loan officer will need details of your credit history, income, and tax payments to process your application. Instead of running from pillar to post to organize these documents, all you need to do is give your consent to a request generated by the lender, and the account aggregator will access your data from the relevant entities and provide them to the lender.
The genesis of Sahmati is a 2016 RBI circular that called for the implementation of an “explicit consent” to be taken into account by account aggregators – non-bank financial corporations (NBFCs) – and the suggestions made by the report of the Srikrishna committee. A consent framework called Data Protection & Empowerment Architecture (DEPA) was developed and conceptualized by policy think tank iSpirt.
Sahmati was established as a Section 8 non-profit. This pilot organization will work to accelerate the adoption of DEPA, which aims to preserve privacy and use data for good.
It is understood that if this works, DEPA could become the default privacy framework for fintech transactions and loan processing etc. with NBFCs or other specified account aggregators being allowed to charge a fee to retrieve the data. users from different databases without having the power to transact. This could possibly be deployed in other sectors such as healthcare and telecommunications in the near future.
Role of account aggregators
The RBI in 2016 approved a new class of NBFC to act as account aggregators (AAs). These AAs will play the role of providing services based on the explicit consent of individual clients.
“AA is a huge step forward because it puts the user at the center of the data ecosystem and gives them meaningful control over their data. With this, India will become a world leader in enabling consented data flows, ”said Arundhati Bhattacharya, former Chairman and CEO of SBI.
“I urge financial service providers to adopt the AA model at the earliest, as it will allow them to become extremely efficient at processing large data sets, provide better customer service and enable financial inclusion by reducing transaction costs and reducing the risk of fraud. Like the UPI, the AA system may be another major innovation to emerge from India, ”she said.
Account aggregators will be able to retrieve but not see data from, say, your bank when you apply for a loan, and charge a fee for retrieving and providing this information to the parties involved (loan providers and banks whose account statements need to be recovered). The process will be fully encrypted so that account aggregators cannot access the data they collect or provide.
If Sahmati works, the need for people to physically visit multiple branches for their data, share their confidential login credentials, or log into multiple sites themselves to download and collate the information before sharing it with lenders, financial planners and other service providers will be eliminated.
So far, six account aggregators have received RBI approval in principle to proceed. They are: NESL Asset Data, CAMS Finserv Financial Services, Cookiejar Technologies (product called Finvu), FinSec AA Solutions (product called OneMoney), Yodlee Finsoft and Jio Information Solutions.
Account aggregator will also allow users to revoke their consent to sharing data and share individual data items without sharing a complete history. It’s almost impossible to do when full bank statements, mutual fund statements, etc. are shared in hard copy or downloaded and sent to service providers.