The Reserve Bank of India has updated its Master Directions on the Account Aggregator framework. The framework allows NBFCs (Non-Banking Financial Companies) to consolidate financial data of customers in one place in order to provide access and sharing services with regard to that data. Last month, eight major banks joined the framework including the State Bank of India, Axis Bank, ICICI Bank, etc., and launched the framework.
The RBI touted such a framework first in 2015.
What does the framework do?
The framework aims to remedy the arduous process of gathering multiple documents, statements, clearances, NOCs, certificates, and presenting separate bulky files to separate authorities. It will do so by providing a platform for easy sharing of customer data between different authorities/ entities.
Since the framework will source the documents (e.g. Startup India Certificate issued by the DPIIT) from the authorities themselves, it will also ensure the authenticity of the documents. Having said that, the focal point of document sharing would be user consent.
Only NBFCs registered with the RBI can take up account aggregation. You can read more about Account Aggregators here.
Revision to the Master Directions
The updates add two provisions regarding investment from FATF non-compliant jurisdictions, and one regarding declaration of dividends by account aggregators.
Investment from FATF non-compliant jurisdictions: The RBI has added a new provision 4.3. The provisions incorporate its previous circular on the issue dated Feb. 12th, 2021 into the Master Directions. As per the provisions, the account aggregator NBFC should not allow new investors from non-compliant FATF jurisdictions to directly or indirectly acquire ‘significant influence’, as defined in the applicable accounting standards. As such, investors from non-FATF compliant jurisdictions cannot hold more than 20 percent of the voting power of the NBFC.
If the jurisdiction is classified as non-compliant after the investment, the investor can continue with the investment or bring in additional investments too.
Declaration of dividends: A new provision 15A mandates NBFCs to declare dividends from the profits of the financial year in a specific manner. The provisions incorporate RBI’s previous circular in this regard dated June 24th, 2021. The board of directors can take into account long terms growth plans of the NBFC while considering proposals for dividends.
However, NBFCs can declare dividends only after meeting some minimum prudential requirements. For example, they shall have met the leverage ratio requirements for the last three years.
The RBI has included similar provisions in the Master Directions for NBFC Peer to Peer Lending Platforms.