Regulators make applying
for loan less cumbersome
An app will take a user’s consent to share financial data with organisations
NEHA ALAWADHI & KARAN CHOUDHURY
New Delhi/Bengaluru, 27 July
F
our major financial regulators have
come together to set up a non-profit
organisation that will make it easier
for users to apply for loans by helping 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 allow regulated
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 would need details
on your credit history, income and tax pay-
ments to process your application. Instead
of running from pillar to post to arrange
these documents, all you have to do is give
consent to a request generated by the loan
provider, and the account aggregator will
access your data from entities concerned
and provide to the loan provider.
The genesis of Sahmati is an RBI circu-
lar from 2016 which asked for implemen-
tation of “explicit consent” to be taken by
account aggregators — non-banking finan-
cial companies (NBFCs) — and the sugges-
tions made by the Srikrishna Committee
report. A consent framework called Data
Protection & Empowerment Architecture
(DEPA) has been developed and conceptu-
alised by policy think-tank iSpirt.
Sahmati has been set up as a Section 8
non-profit. This pilot organisation will work
to accelerate the adoption of DEPA, which
works with the aim of maintaining privacy
and using the data for good.
The understanding is that if this works,
DEPA could become the default privacy
framework for fintech transactions and loan
processing and so on, with NBFCs or other
specified account aggregators being
allowed to charge a fee for fetching user
data from different databases without hav-
ing the power to carry out any transactions.
This could eventually be rolled out to oth-
er industries such as healthcare and tele-
com in the near future.
Role of account aggregators
The RBI had in 2016 approved a new class
“The account aggregators is a huge step
forward because it places the user at the
centre of the data ecosystem and gives
her meaningful control over her data.
With this, India will become a world
leader in enabling consented data flows”
ARUNDHATI BHATTACHARYA,
Former chairman and managing director, SBI
of NBFCs to act as account aggregators (AA).
These AAs will play the role of providing
services based on the explicit consent of
individual clients.
“The AA is a huge step forward
because it places the user at the centre of
the data ecosystem and gives her mean-
ingful control over her data. With this,
India will become a world leader in
enabling consented data flows,” said
Arundhati Bhattacharya, former chair-
man and managing director of SBI.
“I would urge financial service providers
to embrace the AA model at the earliest
because it will enable them to become
extremely efficient in processing large data
sets, provide better customer service and
enable financial inclusion by lowering
transaction costs and reducing the possi-
bility of fraud. Like UPI, the AA system can
be another huge innovation to emerge out
of India,” she said.
Privacy concerns
Account aggregators will be able to fetch
but not see data from, let’s say, your bank
when you apply for a loan, and charge a
fee for fetching and providing this infor-
mation to the parties concerned (loan
DATA WALLET
„ RBI, Sebi, Irdai and PFRDA
have come together to set
up Sehmati, a non-profit
„ App will allow users to give
and revoke explicit consent
for their data to be accessed
„ If it works, the need for
people to physically visit
multiple branches for their
data or log-in to multiple
sites to download and
collate the information
will be eliminated
„ The process of fetching data
will be fully encrypted so the
account aggregators will not
be able to access information,
addressing privacy concerns
„ Six account aggregators have
so far received in-principle
approval from the RBI
provider and banks whose account state-
ments are to be fetched). The process will
be fully encrypted so the account aggre-
gators will not be able to access any data
they fetch or provide.
If Sahmati works, the need for people
to physically visit multiple branches for
their data, share their confidential login
ID details, or log-in to multiple sites
themselves to download and collate the
information before sharing it with
lenders, financial planners and other
service providers will be eliminated.
Six account aggregators have so far
received in-principle approval from the
RBI to move ahead. These are — NESL
Asset Data, CAMS Finserv Financial
Services, Cookiejar Technologies (prod-
uct called Finvu), FinSec AA Solutions
(Product titled OneMoney), Yodlee
Finsoft, and Jio Information Solutions.
The account aggregator will also
enable users to revoke consent to share
data, and also share individual items of
data without sharing a full history. This is
almost impossible to do when full bank
statements, mutual fund statements etc.
are shared in paper form or downloaded
and sent to service providers.