Open Banking India: A Revolutionary Change in 2025

Open Banking India

Have you ever waited days for a loan, rifling through emails and bank statements for every document? Here’s the thing: open banking is about to end that hassle. In India, this system lets you securely share your financial data with fintech apps – but only with your say-so. Last year I linked my bank and investment accounts through an app, and my loan got pre-approved in minutes. That felt like magic, and it’s all thanks to India’s emerging open banking infrastructure.

Open banking started in Europe (after the 2018 PSD2 rules) and quickly spread to the UK – which now has over 13 million active users. India is catching up fast, building on Aadhaar and UPI. The RBI’s Account Aggregator (AA) framework is at the core. Imagine an AA as a digital consent manager: you tell it which accounts to link, and it only pulls your data (balances, transactions, loans, investments, etc.) when you allow it. More on how it works below.

How Open Banking Works: A Step-by-Step Look

Open banking is really just about giving permission and letting apps fetch data via secure APIs. Here’s how it usually goes:

Choose a trusted app or AA. Install your bank’s or a reputable fintech’s app that supports open banking. Check that it’s RBI-approved or Sahamati (fintech alliance) certified – licensed AAs always display their approval.
Link accounts & authenticate. In the app, tap “Link Accounts” (or similar). You’ll be redirected to your bank’s portal or the AA’s interface to log in securely (using netbanking credentials, a UPI PIN, or Aadhaar eKYC). This confirms it’s really you.
Review the consent request. The app will show exactly what it wants (e.g. “last 6 months of bank statements” or “loan details”). Only approve the data needed. For example, a loan app might ask only for your salary account statements.
Data sharing happens. Once you approve, your bank (or the AA) encrypts and sends the agreed data to the app via APIs. Your passwords never leave the bank; only the specific info you allowed is shared.
Manage your consents. You can always log into the AA or app to see and revoke permissions. If you revoke consent, the app immediately loses access.

Figure: A simplified view of how open banking flows your data. You authorize the share, and encrypted APIs connect your banks (left) to fintech apps (right) via an Account Aggregator (center).

For example, I tried a budgeting app that used open banking. In two taps it fetched all my accounts and instantly showed how much I spent on dining out this month. No paper statements, no delay. That’s the convenience open banking promises. From a lender’s perspective, it means everything moves faster: instead of waiting a week for paperwork, they can verify your income/expenses in real time.

India’s Account Aggregator Framework

India’s version of open banking is built around Account Aggregators (AAs). These are licensed finance entities under RBI rules – think of them as secure middlemen. By law, AAs cannot store or misuse your data; they simply relay it with your explicit consent. All transfers are end-to-end encrypted, and you can revoke consent anytime.

Figure: India’s Account Aggregator (AA) framework. On the left are your financial sources (banks, insurers, pensions). On the right are service providers (lenders, wealth managers). The AA (middle) securely transfers data only when you authorize it.

The government now calls AAs part of India’s “digital public infrastructure”, alongside Aadhaar and UPI. After just four years, the AA network is huge: by late 2025, it had connected 2.2 billion financial accounts and 112 million users. Industry reports say over 100 million consents have been recorded and about 80–90 million people (nearly 8% of adults) are actively using AAs. The growth is blistering – consents jumped over 1000% year-on-year recently.

For everyday users, this means real empowerment. You open an AA app to link accounts, and any service you use can only ask for and receive the data you approve. For instance, a lender might ask to see your bank statements: you enter your UPI PIN or Aadhaar OTP, and the AA pulls those statements from your bank and sends them. If you change your mind later, just log into the AA app and revoke the consent – the lender won’t see any more of your data.

Why Open Banking Matters: Benefits for Everyone

Open banking isn’t just tech hype – it delivers tangible

benefits:

Consumers: No more paperwork nightmares. Lenders can get your income and expense data instantly, so approvals may come in hours instead of days. You also get automatic insights – for example, the app can track your spending and suggest savings or highlight hidden fees. You stay in control: you approve exactly what data to share and can revoke it any time.
Banks & Lenders: Access to real-time, customer-approved data means smarter decisions. Instead of relying on outdated credit scores, they use your actual transactions. That can translate into faster approvals or better rates for you. Banks can even tailor products: e.g., if your data shows a lot of travel, they might pitch you a premium forex card.
Fintech Innovators: Data is gold. Fintech startups can plug in (with your consent) to build smarter tools – robo-advisors that rebalance investments in real time, or apps that alert you when bills are due. This spurs a wave of innovation. In fact, analysts estimate India’s open finance sector could be about $7.5 billion by 2030, unleashing many new services.

In my experience, even simple apps feel decades ahead now. One expense tracker I use automatically set up a toll discount card when it noticed my commute expenses – something that was basically impossible a few years ago.

Step-by-Step: How to Use Open Banking Safely

Getting started is like installing any finance app – just with a few extra checks:

Use official/licensed apps. Only install apps from Google Play/App Store that clearly state RBI approval or Sahamati membership. Legitimate AAs will show their license info in the app.
Keep devices secure. Ensure your phone/computer has the latest updates, and use strong passcodes or biometric locks on your banking apps.
Share minimally. When consenting, only approve the data the service needs. If an app asks for more than necessary (like your full profile when it only needs a balance), stop and double-check.
Review consents often. Every month or so, log into your AA portal. It will list active permissions. Revoke any that you don’t use anymore. This makes sure old apps can’t sneak in data later.

Mistakes to Avoid

Granting unlimited access. Don’t just click “allow” without reading. If an app requests full account history for no clear reason, that’s a red flag.
Skipping official verification. Always authenticate through your bank’s or AA’s official interface. Never enter OTPs or passwords from unsolicited links – banks will never ask for credentials outside their portal.
Ignoring two-factor (2FA). Whenever offered, enable extra security (UPI PIN, OTP, device PIN). RBI mandates strong authentication, so use it to your advantage.
Using unregulated apps. Stick to apps with strong reputations. If an app isn’t part of the AA network, it might be a fraud.
Forgetting to revoke. Even after you revoke consent, log out and back in to confirm the app lost access. If it still shows your data, contact the service immediately.

Think of each consent like giving someone a temporary key to your safety deposit box. Only hand it to people (apps) you trust, and remember you can lock the box anytime.

The Road Ahead: What’s Next for India

India’s open banking journey is like UPI’s: a slow start, then explosive growth. Analysts predict 15–20% of adults on open banking by next year, and possibly 25% by 2025, as more banks and fintechs join. Of course, challenges remain – making sure data stays private, preventing fraud, and ironing out liability rules. So far the AA ecosystem has run smoothly – no major breaches have been reported, which is a good sign.

Innovation will only accelerate. Imagine instant loans or insurance priced on your real data – all built on this foundation. In other words, open banking puts you at the center. It hands control of your financial data back to you, making financial services more transparent and personalized than ever.

FAQs

Q: What exactly is open banking?
A: It’s a system where banks (and other financial firms) can share your financial data with third-party apps – but only when you allow it. India’s model uses the Account Aggregator framework (regulated by the RBI). You authorize specific data (like bank statements or investment info), and the AA securely passes it along under your control.

Q: Is my data really safe?
A: Yes. Open banking is built for security. All data transfers are encrypted, and RBI rules explicitly forbid AAs from storing or misusing your information. Plus, every data request requires your explicit consent and a secure login (UPI PIN or OTP), which keeps your accounts locked down.

Q: Who can see my data?
A: Only the specific institution you approved, and only the data you approved. For instance, if you allow a lender to see your last 6 months of statements, then only that lender sees those statements. You can always log into your AA app to view or revoke any permissions.

Q: What if I revoke consent?
A: Once you revoke, the app or service instantly loses access. It won’t get any more data unless you agree again. (Any loan or service already provided remains valid; revoking just stops future data sharing.)

Q: What about UPI and Aadhaar – how is open banking different?
A: UPI is for payments, and Aadhaar/eKYC is for identity verification. Open banking (AAs) is specifically for sharing financial records. All three systems complement each other: Aadhaar for ID, UPI for payments, and AAs for data. Together they form India’s digital finance ecosystem.

Internal Linking Suggestions

For more on India’s digital payments revolution, see our guide on UPI and mobile wallets.
Learn how India’s identity system enables finance in Aadhaar & e-KYC Explained.
Want to manage your money smarter? Check out our review of Top Personal Finance Apps in India that leverage open banking.

Sources: RBI and government reports on Account Aggregators industry analysis on open banking growth.

Open Banking India: A Revolutionary Change in 2025