Consent-Based Data Sharing

Consent-based data sharing refers to a structured mechanism through which individuals and businesses explicitly authorise the access, use, and transfer of their financial data for a defined purpose, duration, and scope. In banking and finance, this approach represents a fundamental shift from institution-centric data control to user-centric data governance. Within the Indian economy, consent-based data sharing has become a cornerstone of digital financial infrastructure, enabling secure data portability, improved credit delivery, and enhanced consumer protection.
This framework ensures that financial data is shared only with the informed approval of the data owner, thereby balancing innovation with privacy and trust.

Concept and Core Principles of Consent-Based Data Sharing

Consent-based data sharing is built on the principle that financial data belongs to the customer and not to the institution that stores it. Access to such data must therefore be conditional, transparent, and revocable.
The core principles include:

• Explicit and informed consent, clearly obtained from the data owner
• Purpose limitation, restricting data use to a specific objective
• Data minimisation, sharing only what is necessary
• Time-bound access, with automatic expiry of permissions
• User control and revocability, allowing consent to be withdrawn

In banking and finance, these principles strengthen accountability and reduce the risk of data misuse.

Evolution in the Indian Financial System

The rapid growth of digital payments, online lending, and fintech services in India highlighted the inefficiencies and risks of traditional data-sharing practices, such as physical document submission and credential-based access. These methods were prone to fraud, data leakage, and exclusion.
To address these challenges, India adopted a consent-based data-sharing architecture aligned with its broader digital public infrastructure vision. The framework gained formal recognition with regulatory support from the Reserve Bank of India, particularly through the introduction of the Account Aggregator ecosystem.
This evolution marked a transition towards a standardised, secure, and privacy-preserving financial data environment.

Role in the Banking Sector

In the banking sector, consent-based data sharing enables banks to access verified customer information directly from source institutions, subject to user approval. This includes bank statements, deposit details, loan records, and transaction histories.
Such access:

• Enhances accuracy in credit appraisal and risk assessment
• Reduces turnaround time for loan processing
• Minimises reliance on paper documents and self-declared data
• Strengthens compliance with customer confidentiality norms

Banks are required to strictly adhere to the consent terms and are prohibited from storing or reusing data beyond the authorised purpose.

Importance in Financial Services and Fintech

For non-banking financial companies and fintech firms, consent-based data sharing is essential for delivering digital-first financial products. It allows these entities to assess customer eligibility using reliable financial data without directly handling sensitive credentials.
This model supports:

• Digital lending and instant credit decisions
• Customised financial products and pricing
• Inclusion of thin-file and underbanked customers
• Reduction in fraud and misrepresentation

By lowering information asymmetry, consent-based data sharing enhances competition and efficiency across the financial services sector.

Consent-Based Data Sharing and the Account Aggregator Framework

The Account Aggregator framework operationalises consent-based data sharing in India. Account Aggregators act as neutral intermediaries that facilitate the secure transfer of financial data between Financial Information Providers and Financial Information Users.
Key features include:

• Standardised, machine-readable consent
• Encrypted and traceable data flows
• No storage or monetisation of data by intermediaries
• Full visibility and control for customers

This institutional design ensures that consent-based data sharing is scalable, interoperable, and trusted.

Regulatory and Governance Framework

Consent-based data sharing operates within a comprehensive regulatory environment that prioritises consumer protection and systemic stability. Financial institutions are required to implement robust consent management systems, clear disclosures, and strong cybersecurity controls.
Governance expectations include:

• Simple and transparent consent interfaces
• Prohibition of forced or bundled consent
• Regular audits and supervisory oversight
• Effective grievance redress mechanisms

These measures align Indian practices with global developments in open banking while retaining a strong emphasis on user sovereignty.

Macroeconomic Significance for the Indian Economy

At the macroeconomic level, consent-based data sharing improves the efficiency and inclusiveness of the Indian financial system. By enabling trusted data flows, it accelerates credit delivery and improves capital allocation.
Its broader economic implications include:

• Enhanced credit access for MSMEs and individuals
• Lower transaction and compliance costs
• Increased financial sector competition
• Strengthened confidence in digital finance

These outcomes contribute to sustainable economic growth and financial deepening.

Advantages of Consent-Based Data Sharing

Consent-based data sharing offers multiple benefits:

• Empowerment of customers through control over personal data
• Improved privacy and security
• Operational efficiency for financial institutions
• Better risk assessment and pricing
• Support for innovation within regulated boundaries