Fintech is no longer the “future”, it’s the financial present of India. From UPI autopay to instant KYC onboarding, every digital interaction we make with money is powered by an ecosystem that is growing fast… sometimes faster than laws that govern it.
Recognizing this, the Reserve Bank of India (RBI) has rolled out new frameworks and guidelines to bring accountability, cybersecurity, and consumer protection into the heart of digital finance. These reforms directly impact digital wallets, NBFC-lending models, payment apps, and the overall digital banking environment in India, a market processing billions of transactions daily.
So what exactly has changed? And what should fintechs do to stay compliant?
Let’s break it down in a way that’s practical and easy to understand.
What is this new framework
On 28 November 2025, the RBI introduced the Digital Banking Channels Authorisation Directions, 2025, a comprehensive, unified rulebook for digital banking across the country. What this does is combine and replace a host of older, fragmented guidelines that regulated internet banking, mobile banking, USSD, SMS, and other electronic banking channels.
So what counts as a “digital banking channel”?
Essentially any banking service over the internet or mobile devices: browser-based internet banking, mobile apps, SMS or USSD banking. These channels may offer basic services (view-only) like balance checks and statement downloads, or full services (transactional), such as fund transfers, payments and other banking operations.
For banks that just want to offer view-only services, the criteria are relatively light: their core banking system (CBS) must be in place and their IT infrastructure must support IPv6. Once that is done, they must inform RBI and submit an internal controls adequacy report.
But if a bank wants to enable full transactional digital banking, the bar is higher. Banks must demonstrate sound financial health (meeting capital norms), have robust technical and cybersecurity infrastructure, and show readiness for ongoing maintenance. They need permission from RBI before launching such services.
Why all this rigour?
Because RBI wants digital banking to be secure, reliable and trustworthy. The new rules embed old requirements, around IT governance, cybersecurity, fraud-risk management, and payment safety, inside this new framework. Banks remain responsible even if they outsource services to fintechs or third-party vendors.
From a customer’s perspective, these changes are good news. First, access to digital banking must be optional: banks cannot force customers to sign up for internet or mobile banking just to get a debit card or other services. Business Standard+1 Second, banks must obtain explicit consent before registering a customer for digital banking, and clearly inform about alerts (SMS/email) for all account activity, financial or otherwise.
What this means in practice:
A safer, more transparent digital banking experience. Users can choose whether to go digital, but if they do, they get proper safeguards, informed consent, and better protection against fraud.
In short, the new RBI framework marks a turning point for digital banking in India. It gives banks a clear regulatory roadmap, offers customers more transparency and control, and lays the foundation for a more secure, uniform, and inclusive digital banking ecosystem across the country.
New consolidated KYC rules for banks and payment-system providers
In 2025, RBI introduced a refreshed framework for customer identity verification by issuing the new KYC Master Directions 2025 (KYC MD 2025), replacing the earlier KYC MD 2016 entirely. Under this update, all banks, as well as payment-system providers such as Payment Aggregators (PAs), Prepaid Payment Instrument (PPI) issuers, and other PSPs, must align their compliance, onboarding, and due diligence processes with the new regulations.
At its core, the update reorganises and consolidates earlier instructions, rather than rewriting the entire rulebook from scratch. Most of the fundamental KYC obligations remain as before: verifying identity, verifying address, collecting and maintaining required documents, and conducting due diligence for anti-money laundering (AML) and combating financing of terrorism (CFT). TaxGuru+1 What changes is clarity: outdated or redundant provisions have been removed, procedural ambiguities addressed, and the regulatory framework streamlined to improve ease of implementation.
For regulatory-compliance teams in fintechs, banks or payment firms, this means a need to review all internal policies, operational checklists and onboarding flows, and ensure they refer to KYC MD 2025, not the old 2016 version. It also means updating compliance manuals, training staff, and ensuring that any third-party agents or business correspondents used for customer onboarding are also compliant.
In addition, the new directions introduce certain customer-friendly modifications: for example, under the amendment directions, for low-risk individual customers, the deadline for periodic KYC updation has been relaxed, giving institutions more flexibility while still ensuring regular monitoring.
Overall, the KYC MD 2025 represents an evolution, not a revolution, in India’s identity-verification rules. For stakeholders, it offers a better-organized, clearer, and more workable regulatory baseline, but also underlines the importance of meticulous compliance.
Why the recent regulatory changes matter for fintechs, digital-payment startups, and NBFCs?
The recent regulatory updates by Reserve Bank of India (RBI) mark a turning point for fintechs, digital-payment startups, and NBFCs operating in India. For businesses such as payment gateways, digital wallets, or bank-integrated services, the new Digital Banking Channels Authorisation Directions, 2025 introduce stricter compliance standards, forcing them to build with consent, security, and transparency at the core, rather than as afterthoughts.
Under this framework, any bank offering digital banking, whether view-only (like balance check, statement download) or fully transactional, must meet robust technical and governance criteria. For fintechs that rely on banking partners or provide digital-payment infrastructure, this means their technology, partnerships, and operations must also align with defined standards of cybersecurity, fraud-risk management, data governance, and third-party oversight.
Simultaneously, with the revised KYC Master Directions 2025 (KYC MD 2025), all banks, payment-system providers (PSPs), payment aggregators (PAs), prepaid-instrument issuers and other regulated payment firms must update their onboarding and compliance processes. That means updated document verification, anti-money-laundering (AML) checks, risk-based due diligence, and compliance record-keeping must be in place, even for fintechs that are not traditional banks.
For fintech lending platforms and NBFCs, the regulatory ripple doesn’t stop there. As the RBI moves toward standardising practices, including tighter norms for lending, risk evaluation, co-lending arrangements and even non-fund-based credit instruments, platforms dealing with gold-backed loans, BNPL, or co-lending must remain alert. The evolving regulatory paradigm signals that lending-related fintechs will soon be subject to more uniform oversight, just like traditional financial institutions.
Why does all this matter? For fintechs and startups, these are more than compliance checkboxes, they reshape what “operating responsibly” really means in India’s digital finance ecosystem. On the positive side, these reforms promise greater trust, reduced fraud risk, and clearer legal footing, all of which can improve customer confidence and long-term sustainability.
On the flip side, the bar has been raised. Building a fintech that scales while staying compliant now requires careful investment in technology, rigorous internal processes, regular audits, and possibly hiring legal or compliance expertise. Regulatory burden is rising, and fintechs must plan for it early.
In short: these regulatory changes aim to bring clarity, consistency, consumer protection, and financial-system stability. For fintechs, digital-payments startups, and NBFCs, it’s time to treat compliance not as a burden, but as the foundation of credible, long-lasting growth.
