Regulatory Compliance Checklist for Fintech Apps

India’s trajectory of growth in the fintech market is nothing short of impressive. With a CAGR of over 20%, the sector is on a rapid ascent, propelled by high adoption rates and innovative service offerings. 

In fact, India boasts as the second-largest and fastest-growing fintech ecosystem around the globe, with an adoption rate of 87%, reflecting the nation’s enthusiastic embrace of financial technology.

In the ever-evolving world of fintech, regulatory compliance is crucial for maintaining credibility, trust, and a seamless operation. 

Many startups and entrepreneurs in the Fintech space often find themselves navigating through various sources to understand the legalities and regulations required to stay compliant with the country’s laws.

This blog serves as a comprehensive guide to help your Fintech app align with the Indian legal framework and regulatory standards.

Let’s start with the most Important Regulatory Body of India, RBI. 

RBI Guidelines

Fintech companies in India are governed by the Reserve Bank of India (RBI). 

Ensure your Fintech App complies with:

Payment and Settlement Systems Act, 2007

Required for any payment services, including mobile wallets or UPI-based apps.

NBFC Licensing Requirements

If your fintech app deals with lending or digital credit, make sure you’re following the Non-Banking Financial Company (NBFC) rules.

Prepaid Payment Instruments (PPI)

Comply with guidelines if your app offers prepaid payment instruments, like wallets or vouchers.

KYC (Know Your Customer) Compliance

A thorough KYC process is mandatory for onboarding users, verifying identities, and preventing fraud.

Data Privacy and Protection Laws

Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011

Ensure you have a robust framework for data protection, especially for handling sensitive customer data.

Digital Personal Data Protection Act

The India Digital Personal Data Protection Act 2023 (DPDPA) is a landmark legislation that aims to safeguard the privacy of individuals in the digital age. The Act came into effect on September 1, 2023, and it applies to all organizations that process personal data of individuals in India.

Prevention of Money Laundering (PML) Act, 2002

Your app must include Anti-Money Laundering (AML) measures to comply with this act. Ensuring proper KYC verification and monitoring suspicious transactions will help you avoid legal issues and protect your users.

Cybersecurity Guidelines

CERT-In Guidelines

All fintech apps must report cyber incidents to the Indian Computer Emergency Response Team (CERT-In). Implement strong security measures like two-factor authentication, encryption, and frequent vulnerability testing to protect user data.

Digital Payment Security

The RBI’s guidelines on digital payments require fintech apps to offer secure payment methods, protect user information, and ensure transparent transaction processing.

Compliance with GST (Goods and Services Tax)

If your fintech app involves the sale of digital services or goods, ensure you’re meeting India’s GST requirements by properly registering and charging taxes when applicable.

 P2P Lending Compliance (If Applicable)

Peer-to-peer lending platforms are regulated by the RBI. If your fintech app facilitates lending, ensure compliance with the NBFC-P2P guidelines, which govern the conduct of P2P lending businesses.

Intellectual Property (IP) Protection

Ensure that your fintech app complies with Indian intellectual property laws, including software patents, trademarks, and copyright protections, to avoid legal disputes over proprietary technologies or branding.

Foreign Exchange Management Act (FEMA)

If your fintech app involves cross-border payments or deals with foreign exchange, ensure compliance with FEMA regulations for safe and legal financial transactions.

Consent and Disclosure Policies

Your fintech app must include clear consent policies, especially for data collection, third-party sharing, and marketing communications. Transparent disclosure of terms and conditions is critical to building trust with your users and complying with legal requirements.

NOTE:

The information provided in this Blog is for general informational purposes only and does not constitute legal or financial advice.

You can find more comprehensive details on each of these from these Government Portals:

PRAVAAH portal

RBI Retail Direct portal

IRDAI

National Single Window System (NSWS)

IFSCA FinTech Regulatory Sandbox