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Finance Minister Nirmala Sitharaman has directed all public sector banks (PSBs) to onboard the account aggregator system by the end of July. The account aggregator system is an undertaking of the central government to ease access to credit and improve credit delivery.

A statement from the Ministry of Finance said, “Sitharaman instructed all the Public Sector Banks to onboard the account aggregator system by the end of July.”

The account aggregator system will help banks leverage user data with their consent to provide better service. The system, first conceptualised back in 2014, went live in September 2021 to much fanfare.

Much like UPI with payments, the account aggregator system will help streamline the lending sector.

It is expected that the account aggregator system will reduce the time it takes to verify customer documents. Users can choose the accounts they want to link with the system and their data will be shared only if they provide consent. Users can also revoke access to their data. 

An entity thus registered with the account aggregator system will be called an account aggregator. It will be a type of RBI-regulated entity that helps users access and share data from one financial institution they have an account (a financial information user (FIU)) with to any other regulated financial institution in the network. All account aggregators will have an NBFC-AA licence.

Currently, nine private banks are already live on the system, which include HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank, among others. However, only one government bank, the Union Bank of India, has joined the account aggregator system so far, with a few more state-owned lenders working to join the system.

Recently, Pine Labs-owned fintech startup Setu’s subsidiary Agya Technologies received an in-principle licence from the RBI to operate as an account aggregator. Agya Technologies joined the likes of PhonePe, NSDL E-Governance and Finvu as account aggregators that are not banks.

The Finance Minister’s comments came at a meeting she chaired with the PSBs and Regional Rural Banks (RRBs) to review operational and governance reforms in RRBs and the performance of the Kisan Credit Card (KCC) scheme for Animal Husbandry, Dairying and Fisheries.

At the meeting, Sitharaman also urged the sponsor banks to formulate a clear roadmap for RRBs to support the post-pandemic economic recovery. It is prudent to note here that the PSBs act as sponsor banks to RRBs, and own a 35% stake in the same. 

The Finance Minister also advised the Indian Banks’ Association (IBA) and sponsor banks to help RRBs with technology and conduct workshops to share best practices.