In the future, it is possible that the technology behind the AA will allow regulators to connect related parties and also establish audit trails.
Nandan Nilekani calling the launch of Account Aggregators (AAs), “another UPI moment” got everyone to sit down and take note. But the word itself is still difficult to understand.
So let’s start with what these new entities are. AAs are financial intermediaries licensed by the Reserve Bank of India (RBI). Their purpose is to allow a lending bank or an NBFC to “see” all of a borrower’s financial data, with just a few clicks. Today, when a borrower – an individual, a small and medium-sized business (SME) – goes to the bank for a loan, they must surrender armed with their bank and tax records to convince banks of their net worth. AA saves time and effort.
The AA is not a financial company. It’s more of a technology company. Like Google, it extracts all the relevant financial information about the borrower, with a single click, and places it in front of the lending bank, NBFC, or fintech, so the lender can assess the borrower’s creditworthiness.
Here it is important to understand how AA is different from the credit bureaus. Credit bureaus like CIBIL also make it easy for a bank to assess a new borrower. The difference is that the credit bureaus assess a borrower’s credit information – how many loans they’ve taken and how often they’ve repaid them. But a bank that needs to lend is better placed to assess the borrower if it knows the amount of deposits they have, as well as the number of investments in mutual funds, insurance companies, and pension funds. that he owns. Indeed, now GSTN has also agreed to provide borrower’s GST information via AA to a potential creditor. The GST credit flow can provide a bank with great comfort in the business of the SME borrower.
It is important to add that a lending bank can only obtain information about the borrower with their consent, so at all times the privacy of the borrowers is protected.
AA should usher in unprecedented financial inclusion. A fintech or an NBFC should be able to consult the savings accounts of casual workers and small self-employed people in remote areas and be able to lend them money according to the regularity of their income. MSMEs, who are already getting loans, can get more loans if banks can see their GST tax credits.
Today, the RBI has only allowed entities regulated by a financial regulator to provide information to the AA. Going forward, if power companies and telecommunications companies are also allowed to share their customer data, it could dramatically increase the number of people that banks, NBFCs, and fintechs might be willing to lend. This can increase the productivity of the entire economy and is why Nilekani perhaps calls it “another UPI moment”.
In the future, it is possible that the technology behind the AA will allow regulators to connect related parties and also establish audit trails. In this sense, AA can also be the start of a “Google” moment for financial regulators. Technology can allow regulators to get so much online information about a business that regulators, auditors or investigative agencies may be able to more easily sniff out favors from related parties or siphon money from them. related entities.
Overall, like COWIN or Aadhaar or Jan Dhan, AA can universalize the availability of the public good – in this case finance – and result in higher productivity and growth for the economy.
(Edited by : Aditi Gautam)
First publication: STI