The Role Of A Self-Regulatory Organisation For Account Aggregators

Account Aggregators (AAs) are establishing a new paradigm in India’s financial sector by enabling secure and user-controlled data sharing. The RBI’s 2016 framework for NBFC-AAs paved the way for these entities to retrieve, consolidate, and present financial data from diverse Financial Information Providers (FIPs) to authorized Financial Information Users (FI-Us) across various regulatory domains. This multi-stakeholder ecosystem, experiencing increasing adoption, necessitates a market-driven mechanism to address potential operational challenges and foster wider acceptance, leading to the rationale for a Self-Regulatory Organisation (SRO). Therefore, the RBI released the “Framework for recognising Self-Regulatory Organisations (SROs) for the Account Aggregator Ecosystem” on March 12, 2025.[1] Let’s break down the same below.

The Need for a Dedicated SRO-AA: Bridging Regulation and Innovation

The inherent intricacy of the AA business arises from the engagement of more than one regulated party under several FSRs, necessitating a balance between regulatory control and encouragement of innovation. An SRO-AA presents a pragmatic mechanism to respond to arising operational concerns and ensure the industry’s sound growth by supplementing formal regulation. The RBI’s decision to recognize such bodies, mirroring its broader framework for SROs, highlights the strategic importance of this market-led initiative in nurturing the AA ecosystem’s growth.

Characteristics and Objectives of the SRO-AA

The SRO-AA should reflect genuine representation of the entire ecosystem, including NBFC-AAs, FIPs, and FI-Us, to facilitate pragmatic rule-making. It should lay down and monitor compliance with ethical and governance standards through robust, transparent mechanisms. Developmental orientation is essential, involving support, guidance, public education, and encouraging ecosystem development. Freedom from influence by any one member is essential for objective operation and fair treatment.

In addition, it should ensure standardized grievance redressal and dispute resolution processes. The SRO-AA’s goals are to create objective rules of member behavior and compliance, foster a culture of regulatory compliance and public good, serve as a collective voice for members, address wider ecosystem issues, inform policymaking through data sharing, and foster innovation with strong self-governance.

Eligibility Criteria and Membership

Setting up a trustworthy SRO-AA requires strict eligibility criteria for applicants in the form of a not-for-profit organization under Section 8 of the Companies Act, minimum net worth of two crore to be maintained regularly, diversified shareholding, proven IT infrastructure capability, professional integrity of the personnel, and lack of negative legal background.

Membership shall be available to all participating FIPs, FI-Us, and NBFC-AAs, with vigorous encouragement of participation by NBFC-AAs. Balanced representation involving at least 25 distinct entities each from FIPs and FI-Us, and a fair and non-discriminatory fee regime, is necessary. The SRO-AA shall obtain authority under membership agreements to make rules and enforce compliance.

Governance and Management

Functioning with professionalism, transparency, and autonomy, per high standards of governance under the Companies Act, 2013, is pivotal for the SRO-AA. These include professional management as envisaged in its AoA/bye-laws, transparent enunciation of its functions, established membership criteria, a director rotation policy, reporting of director change or adverse information to the RBI without delay, sufficient skilled personnel and technical proficiency, transparent process of governance, and ensuring regulatory compliance by the members.

The Board of Directors should satisfy RBI-approved ‘fit and proper’ standards, demonstrate professional integrity, possess no negative legal background, comprise at least one-third of independent directors (including the Chairperson) with no AA ecosystem relationships, restrict NBFC-AA nominations to one-fourth, provide diverse experience from FIPs and FI-Us, and have a director with banking/financial services regulatory experience. The SRO-AA can constitute specialist committees comprising member specialists and must have independent committee chairmen where possible.

Functions and Responsibilities

The SRO-AA’s fundamental duty is to foster best practices and controls amongst members, protecting stakeholder interests. This includes formulating a code of conduct for members and outsourced entities, creating standard agreement templates, encouraging fair competition, cooperating with the RBI on responsible data use, constantly reviewing and revising codes, and establishing performance benchmarks. Supervision has an organized structure satisfying regulatory requirements in preventing fraud and settling disputes, maintaining confidentiality of data complying with the law of data protection, and specifying non-monetary sanctions for infractions against the rules. Developmentally, the SRO-AA will facilitate the exchange of knowledge, organize training, educate the public on matters pertinent to the subject, disseminate industry information, and provide ecosystem statistics to the RBI.

It can offer shared services with RBI permission, help in technical specification adoption, keep participant records, and implement informative dashboards. A grievance redressal and dispute resolution mechanism is necessary, providing counselling and enabling timely resolution through mediation/arbitration. Duties towards regulators involve augmenting their function in compliance and development, being a go-between, keeping them posted, reporting infractions, performing assigned duties, furnishing asked-for data, filing reports, maintaining interactions from time to time, following RBI guidelines, and arranging inspections at its own cost.

Application Process for Recognition

An SRO-AA’s recognition process is strong, with certain application requirements like the MoA, AoA/by-laws, audited financials, board and management information, office bearer powers, and authorized signatory. Applications with incomplete information are rejected once a chance to respond to objections is given.

The RBI grants a “Letter of Recognition” to appropriate applicants, retaining the right to refuse recognition, with the decision being final. Recognition is subject to information being truthful, consistent compliance with the framework and membership criteria, the applicant being ‘fit and proper’, fulfilling specified responsibilities, staying away from conflict of interest, compliance with recognition terms, and being open to periodic review by RBI.

RBI can impose further conditions in the public interest and has the right to withdraw recognition after due process if the SRO-AA’s operations are prejudicial or misaligned with its aims.

[1] https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1291.