Financial Inclusion in India and Its Challenges

Account aggregators


From UPSC perspective, the following things are important :

Prelims level: UPI

Mains level: Paper 3- Account Aggregators


Account Aggregators will enable the use and enrich the quality of information needed for lenders to extend loans without collateral back-up.

Issue of preference for a collateralised loan in India

  • Demand for credit in India far outstrips institutional supply.
  • Financial Service Providers (FSPs) are well aware of this demand.
  • And they have been looking for ways to provide credit without collateral back-up.
  • Historically, financial service providers (FSPs) like banks and non-bank finance companies (NBFCs) have relied on collateral while making lending decisions.
  • In the absence of collateral pledges, the only way to assess a consumer’s willingness and ability to repay is by examining the prospective borrower’s cash flows.
  • Your bank account statement is a digital representation of your financial life.
  • However, this bank account statement-driven process is highly manual, time-consuming, expensive and fraught with potential for abuse.
  • These shortcomings have held back cash-flow based lending for too long in India.
  •  Borrowers in the country have been underserved because of the preference for collateralized loans.
  • Both FSPs and consumers are in dire need of a seamless digital way of sharing account information.

Account Aggregator (AA) framework

  • The account aggregator framework announced by the Reserve Bank of India (RBI) promises to solve these problems.
  • It aims to make financial data sharing as easy as making a Unified Payments Interface (UPI) transfer.
  • This is the promise of account aggregation, as envisaged by RBI.
  • Account aggregators (AAs), with their user interface, will play a pivotal role in closing the trust deficit between FSPs and consumers.

Fenefits of Account Aggregator would work

  • User control over data: They permit users to control who gets access to their data, track and log its movement and reduce the potential risk of leakage in transit.
  • A single-window format allows user-friendly data movement and reduces the need for physical transfers and post-facto attestations.
  • Industry-standard for consent: AAs create a default industry standard for consent that cuts through the dense fine print buried in most privacy policies.
  • Wider data points to rely on: With the security of this data as a given, AAs allow lenders (or other FSPs for that matter) to rely on a wider selection of data points to determine the trustworthiness of a borrower.
  • Through AAs, FSPs have a chance to provide cash-flow based credit, personalized financial management tools, robo-advisory services and many more innovative financial products and services to a wider cross-section of people.


By incorporating security, transparency and agility into data sharing, AAs could usher in the most significant transformation of India’s fintech landscape yet.

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