5 minutes

How to Future-Proof Your NBFC During the Era of Compliance

On August 11, 2023, the President of India signed the “Digital Personal Data Protection Bill” into law. While this legislation ushers in new technologies, it also comes with legal complexities and bureaucratic challenges. Indeed, NBFC compliance has grown more intricate.

To navigate this changing environment, NBFCs can strategically rethink their strategies and existing processes. In this blog post, we will delve into how NBFCs can navigate this new era and discover the tools to simplify operations.

Understanding the DPDPA

The Digital Personal Data Protection Bill of 2023 (DPDPA 2023) is a substantial legislative effort ensuring personal data security in the digital age. This comprehensive framework aims to empower individuals, providing control over their data while establishing stringent guidelines for responsible data handling. The DPDPA distinguishes personal data in digital form, outlining specific conditions for regulated personal data. Unlike previous legislations, it doesn’t categorize “Sensitive Personal Data,” emphasizing uniform protection for all digital personal data.

Terms to know:

  • data fiduciary is the person or entity that decides on the processing of data. This is also known as a data controller in many parts of the world.
  • data processor is the person who processes personal data on behalf of the data fiduciary.
  • data principal is the individual whose personal data is being processed. This is also known as a data subject in the GDPR.

How the DPDPA’s Impacts Operations:

  1. Regulatory Changes: The upcoming implementation of the Digital Personal Data Protection Act (DPDPA) will redefine the responsibilities for Significant Data Fiduciaries in the financial services sector. Regulators are anticipated to tailor DPDPA requirements to specific sub-sectors, offering targeted training for supervisory staff.
  2. Risk Management: Risk management is central to the financial sector’s core. Players in the financial domain will become primary data fiduciaries responsible for DPDPA compliance. 
  3. IT and Cybersecurity: The DPDPA’s main focus on personal data protection necessitates a recalibration of IT and data safeguarding practices within financial institutions. The creation of advanced threat detection, robust encryption, and routine audits are imperative to strengthen digital architecture against evolving cyber threats.
  4. Product Management: At the core of strategic planning is product management, focusing on safeguarding data, being transparent, and respecting user rights. This includes incorporating principles like “privacy by design,” using effective consent methods, giving users clear control, communicating openly, and setting clear data usage policies.
  5. Customer Lifecycle Management: The arrival of DPDPA brings significant changes to how organizations handle customer data, covering stages like acquisition, onboarding, service, retention, and loyalty. The framework emphasizes the crucial need for clear consent, transparent data policies, and minimal data usage throughout the entire customer journey.

Solutions for NBFCs in Managing Compliance:

1. Emphasizing Compliance for Risk Mitigation: NBFCs must adhere to regulatory standards to effectively manage risks associated with credit, liquidity, operations, and overall compliance. Failure to comply can result in penalties, reputational damage, or the jeopardizing of their license.

2. Establishing Robust Internal Controls and Risk Management Systems: To ensure a secure and smooth operation, NBFCs should establish strong internal controls and robust risk management systems. This proactive approach allows them to closely monitor compliance, mitigating potential risks and maintaining operational integrity.

3. Conducting Baseline Applicability Assessment: Before engaging in collaboration, NBFCs should conduct a thorough assessment of the applicability of FinTech solutions to their existing business model. This involves evaluating compatibility, identifying synergies, and understanding the potential impact on overall business strategy.

4. Subscribing to Regulatory Updates: Given the dynamic nature of the financial services industry, staying informed about regulatory changes is crucial. Subscribing to national, real-time, and personalized regulatory updates ensures ongoing compliance, reducing the risk of non-compliance and associated penalties.

5. Cultivating a Culture of Compliance: Integrating compliance into the organizational culture is vital for successful collaboration. This entails fostering a mindset that values regulatory adherence as a fundamental aspect of business operations. Implementation of training programs, awareness initiatives, and employee incentives can contribute to maintaining high compliance standards.

6. Digitizing Compliance Management: Streamlining compliance processes through digitization enhances operational efficiency. Investing in robust compliance management systems facilitates real-time monitoring, reporting, and adaptation to regulatory changes. Digitization reduces the likelihood of errors and enables a proactive approach to compliance.

7. Active Collaboration with FinTechs: Proactive and transparent collaboration with FinTech partners is crucial for mutual success. This involves clear communication, the exchange of insights, and fostering an innovative environment. Regular collaboration meetings facilitate a seamless exchange of ideas, contributing to a successful partnership.

How Tarya Fintech’s End-to-End Solution Can Assist

India’s Digital Personal Data Protection Act 2023 signifies a significant milestone in the legislative privacy landscape. To adapt to evolving technology and data privacy standards, organizations, especially financial companies, can alleviate the challenges of navigating a complex legal and technological environment through partnerships with technology providers for compliance.

Tarya Fintech offers a unified platform that seamlessly integrates data controls across security, privacy, compliance, and governance. This integration streamlines compliance efforts with India’s DPDP Act 2023 and aligns with global privacy and security standards.

Other articles

    Book a Demo

    We will get back to you as soon as possible


      Enter your details and schedule a time to meet.