Last week, the Reserve Bank of India (RBI) issued draft guidelines on a new kind of non-banking finance company (NBFC). In July 2015, the central bank had created a separate category called NBFC-account aggregator.
At present, if you hold different types of financial assets, you do not get a consolidated view of these holdings, especially if the products fall under the purview of different financial sector regulators. Account aggregators are supposed to fill this gap by collecting and providing information of financial assets on one platform.
Financial assets that will form part of this consolidated list include bank deposits such as fixed, savings, recurring and current deposits, deposits with NBFCs and structured investment products. You can also include commercial papers, certificates of deposit, government securities, equity, bonds, debentures, mutual fund units, exchange-traded funds (ETFs), Indian depository receipts, collective investment scheme units, alternate investment fund (AIF) units, insurance policies, balances under the National Pension System, units of infrastructure investment trusts and units of real estate investment trusts.
Once the information about your financial assets is collected, it will be consolidated, organised and presented on one platform. While the report will be with the account aggregator, it will not be the aggregator’s property. Only the customer can use the consolidated statement. You will not be able to do any transactions in financial assets through it.
An account aggregator is an NBFC that will consolidate details of all your financial assets, for a fee. The central bank will regulate and supervise its activities of account aggregation with a view to ensure that the services provided and the terms at which these are provided conform to prescribed standards. Only companies registered with RBI as NBFC–account aggregator, with net owned funds of not less than Rs.2 crore, can become account aggregators.
This new entity will not undertake any other business and it will be an information technology company. Initially, only financial assets whose records are stored electronically and are under the regulation of a few financial sector regulators—RBI, Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority of India (Irdai), and Pension Fund Regulatory and Development Authority (PFRDA)—shall be considered for aggregation.
An account aggregator will have to put in place a dedicated customer grievances cell as well, and complaints will have to be addressed within a month.
This is the first attempt by the apex bank to have an entity that consolidates financial products. “This is a welcome move. Currently, there are companies that do it in an unregulated manner. Drawing guidelines and trying to get consolidated statements of financial assets in the regulatory ambit is a good change,” said Srikanth Meenakshi, co-founder, FundsIndia.com.
The revenue model will be fee charged to customers. But they may also look at other means. “Saying that do share information doesn’t mean that the company can’t do marketing. Also, I don’t see Indian consumers paying a fee. These companies will need a lateral revenue option,” said Srikanth.
It is too early to say whether customers would be interested to pay a fee and use the service. “This move indicates RBI’s resolve to encourage innovation. But like any other innovation, it is too early to say whether customers will be interested in this service,” said Saurabh Tripathi, partner and director, Boston Consulting Group.
The guidelines are on RBI’s website (www.rbi.org.in). Feedback can be sent by 18 March.