"By several years, the Western countries have been talking about open banking. I think the account aggregator is a first step the banking industry in India is going to grapple with that," Setty said while speaking at the 14th edition of the Banking Colloquium, organised by CII on Tuesday.
One of the challenges for the incumbent banks on the digital infrastructure front is how do they manage or handle the account aggregator ecosystem, according to Sreenivasulu Setty, managing director – RDB, State Bank of India.
“By several years, the Western countries have been talking about open banking. I think the account aggregator is a first step the banking industry in India is going to grapple with that,” Setty said while speaking at the 14th edition of the Banking Colloquium, organised by CII on Tuesday.
“For the large banks, large incumbent banks in India, they have to reinvent and make process and products which enable the customers to stay with them. Otherwise, the seamless way you can avail the services just by giving a mandate to any of the NBFCs to get your financial information from other banks through the account aggregator is probably going to be a major development under the digital front,” he pointed out.
The Reserve Bank of India’s account aggregator framework went live earlier this month. Eight major banks — State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank and Federal Bank — joined the Account Aggregator (AA) network that will enable customers to easily access and share their financial data.
The RBI, in 2016, had issued directions for compliance by every non-banking financial company (NBFC) undertaking the business of Account Aggregator.
On the liquidity-driven mispricing of loans, Setty said banks are generally careful. “I presume that we do not want to repeat the mistake on the underwriting part. It is only the pricing which, I think, will continue to be an issue for some time. As the consumption increases and as the investment cycle picks up, some of the liquidity will be taken out and then the pricing will probably be improved,” he said.
The RBI ensured that substantial liquidity was available in the market so that the confidence level of all the participants in the financial services system was maintained, he added.