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India’s fintech industry has been one of the fastest-growing in the world, spanning digital lending, UPI payments, wallets, and neobanks. But while innovation has been impressive, regulation is now catching up fast.
The Reserve Bank of India (RBI) recently issued a clear warning to fintech companies, reminding them that unauthorised lending and payment activities will not be tolerated.
If you’re running a fintech startup, this isn’t a headline to scroll past it’s a line in the sand. Operating in fintech now means understanding and complying with fintech laws in India, being aware of your obligations under fintech regulations, and staying aligned with RBI fintech rules.
Let’s unpack what’s changing, which licenses you need, and how to make sure your business is not just fast — but compliant.
In this blog, we explore..
- RBI’s Warning to Fintechs: Why It Matters
- What the Financial Express Report Revealed
- Fintech Regulation in India — The Broader Picture
- Licenses Every Fintech Should Know About
- Compliance Beyond Licensing
- The Cost of Non-Compliance
- How to Know Which License You Need
- Best Practices for Fintech Founders
- The Road Ahead for RBI Fintech Oversight
- Call to Action — Guidance from NBFC Advisory
- FAQs — Common Questions on Fintech Licensing in India
Why RBI’s Warning Matters
Over the past few years, many fintechs have launched lending, wallet, and credit products by partnering with licensed NBFCs. That’s legal — but not always transparent.
RBI found several cases where fintechs were effectively acting like lenders or banks without authorization. Funds were being collected in unregulated accounts, credit was being extended by unlicensed platforms, and customers were being misled about who the actual lender was.
In response, the central bank tightened the screws.
Now, under RBI fintech supervision, both the tech company and its financial partner share responsibility for Fintech compliance. That means even if you’re “just the platform,” you’re on the hook for proper disclosure, KYC, and governance.
The takeaway? You can’t innovate your way around regulation anymore. The regulator expects you to innovate within it.
What the Financial Express Report Said
The Financial Express report that sparked renewed discussion highlighted several key points fintech founders should note:
- Fintechs handling financial transactions require explicit authorization. Accepting deposits, lending, or transferring funds without a banking or NBFC license is a violation of fintech laws in India.
- Approvals may be needed from multiple regulators. Depending on your business model, RBI, SEBI, IRDAI, and PFRDA could all have jurisdiction.
- Compliance isn’t limited to RBI rules. There are over 1,500 Acts and 69,000+ compliance requirements across Indian law — including data protection, labour, tax, and corporate governance.
- Payments are a major focus area. RBI has emphasized that all payment aggregators and gateways must obtain authorization under its 2020 guidelines.
This isn’t a crackdown for the sake of control — it’s a response to scale. As India’s fintech industry moves trillions of rupees daily, regulation has to match that velocity.
Fintech Regulation in India — The Broader Picture
There’s no single “Fintech Act.” Instead, fintech regulation sits at the intersection of multiple authorities:
- RBI – governs payments, lending, NBFCs, settlement systems, PPIs, and AAs.
- SEBI – oversees investment and wealth platforms.
- IRDAI – manages insurance tech and distribution.
- PFRDA – handles pension-related fintech.
- FEMA & DPDP Act – manage cross-border flows and data protection.
- IT Act – ensures cybersecurity and data handling.
In short, the moment your fintech touches money, credit, or financial data — it becomes part of this web. That’s why understanding fintech laws in India is as essential as understanding your product.
Licenses Every Fintech Should Know About
Here’s the practical rundown — what you might need, and when.
NBFC License (Non-Banking Financial Company)
If your fintech lends, finances, or even indirectly assumes credit risk, you need to register as an NBFC.
Unlicensed lending apps have already been blocked under RBI fintech enforcement.
RBI has made it clear that platforms cannot “rent” NBFC licenses informally — partnerships must be transparent, agreements documented, and loan disbursement flows auditable.
Minimum capital requirement: ₹10 crore net owned fund (for most NBFCs).
Operating without an NBFC license while lending is a direct violation of fintech laws in India.
Payment Aggregator / Payment Gateway License
If your fintech collects money from users and settles it with merchants, you must be authorized under RBI’s Payment Aggregator and Gateway Guidelines (2020).
This ensures:
- Fund flow happens through escrow accounts only.
- Settlements occur within prescribed timelines.
- Merchant onboarding and KYC are verified.
Without this authorization, a fintech cannot legally handle third-party payments — a key point the Financial Express article underscores.
Prepaid Payment Instrument (PPI) License
Wallets and prepaid cards fall under this license. RBI’s framework defines who can issue them, transaction limits, and KYC tiers.
Think of it as a “digital currency control” measure. Any wallet or card system that stores monetary value must follow RBI fintech guidelines — whether you’re a startup or a global payments player.
Account Aggregator (AA) License
Account Aggregators allow users to share their financial data securely and with consent — like a bridge between banks, insurers, and investment firms.
Only RBI-approved entities can act as AAs. If your business handles or transfers financial data, even indirectly, you’re part of this fintech regulation ecosystem.
AAs are a cornerstone of India’s move toward open banking and data empowerment.
Digital Lending / Lending Service Provider (LSP) Framework
Introduced in 2022, these guidelines redefined digital lending. Only licensed lenders (NBFCs or banks) can disburse loans. Fintechs may act as LSPs — the tech layer that connects users and lenders — but they must disclose their partners, fees, and loan ownership transparently.
All disbursements must move directly between borrower and lender bank accounts.
This framework is the backbone of modern RBI fintech regulation.
Specialized Sector Licenses
Depending on your focus:
- Investment apps → SEBI license.
- Insurance platforms → IRDAI registration.
- Pension services → PFRDA approval.
- Cross-border fintechs → FEMA authorization.
Each adds another layer to the growing matrix of fintech laws in India.
Compliance Beyond Licensing
Getting the license is step one. But maintaining compliance is a full-time discipline.
Your fintech must also follow:
- AML & KYC norms under PMLA.
- Data protection rules under the DPDP Act.
- Cybersecurity protocols under the IT Act.
- Consumer redress mechanisms under RBI guidelines.
- Corporate, tax, and labour laws, which affect your structure and hiring.
The Financial Express report’s reference to over 69,000 compliance obligations isn’t exaggerated — India’s legal ecosystem is massive.
Ignoring this layer is what brings most fintechs down, not product failure.
The Cost of Non-Compliance
Here’s what happens when you skip or delay compliance:
- RBI can freeze your payment flows.
- Your NBFC or banking partners can terminate agreements.
- Investors may pause funding during due diligence.
- You risk permanent blacklisting.
The central bank’s position is clear: non-compliance is not innovation, it’s violation.
Following fintech regulation protects your company, your customers, and your reputation.
How to Know Which License You Need
Start by mapping your activities:
- Lending → NBFC or LSP framework.
- Collecting payments → Payment Aggregator license.
- Wallets → PPI authorization.
- Data sharing → Account Aggregator license.
- Investments, insurance, pensions → SEBI / IRDAI / PFRDA respectively.
If you’re unsure, assume regulation applies — because it usually does.
The smartest fintechs now do a Regulatory Impact Assessment before launch. It’s like a blueprint that prevents expensive course corrections later.
Best Practices for Fintech Founders
- Treat compliance like code. Build it into your product.
- Hire regulatory experts early. Not after the RBI notice.
- Stay transparent. Customers and regulators reward honesty.
- Separate regulated activities. Keep your NBFC, payments, and data entities distinct.
- Stay current. Fintech laws in India evolve monthly.
- Document everything. From customer consent to partner contracts.
- Use tech for compliance. RegTech tools are now essential.
Following RBI fintech expectations isn’t just about obeying rules — it’s about earning trust.
The Road Ahead
India’s regulatory stance toward fintech is evolving — moving from a reactive posture to a forward-looking one.
In the coming years, expect a much smarter and more technology-driven oversight system. Regulators are exploring real-time monitoring through APIs and RegTech integrations, making compliance continuous rather than periodic.
There’s also a growing push to create Self-Regulatory Organizations (SROs) that can guide and standardize fintech conduct within specific categories.
A unified digital banking framework is on the horizon, designed to bring clarity to neobanks and other hybrid financial models that currently operate in gray zones.
At the same time, expect stricter data protection norms under the Digital Personal Data Protection Act and deeper scrutiny of AI-based decision-making and credit algorithms as part of evolving fintech regulation.
In essence, the RBI isn’t trying to slow fintech growth — it’s building the safety rails that will help the industry scale with stability, credibility, and trust.
Call to Action
If you’re building a fintech, now’s the time to get your compliance roadmap right. Whether you need NBFC registration, payment aggregator authorization, or clarity on the RBI fintech framework — the first move is understanding where you stand.
At NBFC Advisory, we help fintechs, NBFCs, and investors structure their operations within fintech laws in India, ensuring every product and partnership is regulator-ready.
Our advisory team specializes in designing fintech models that comply with fintech regulation — without slowing innovation.
Reach out for a confidential discussion on your licensing, partnership, or RBI compliance needs. Getting it right the first time isn’t just smart — it’s survival.
Fintech innovation isn’t dying under regulation — it’s maturing. Those who understand and follow fintech laws in India today will build the next generation of trusted, scalable, and investor-ready fintechs tomorrow.
And with RBI fintech oversight getting sharper, that trust is worth far more than speed.
Need expert guidance? Get in touch with our consultants today.
📞 Call NBFC Advisory: +91 93287 18979
🌐 Visit: nbfcadvisory.com
FAQs
1. Can a fintech operate without a license for early testing?
No. RBI expects fintechs to obtain licenses before any financial operations begin, even pilot projects.
2. Do all digital lenders need an NBFC license?
Yes, unless they’re clearly partnered with a registered NBFC or bank and operate transparently under RBI fintech guidelines.
3. How long does it take to get an NBFC license?
Usually 4–6 months, depending on documentation, business model clarity, and RBI due diligence.
4. Is a Payment Aggregator license mandatory for all payment apps?
Yes. If you collect funds from users on behalf of merchants, it’s compulsory under fintech regulation.
5. What’s the minimum capital needed for an NBFC?
₹10 crore net owned fund, as per RBI’s current requirement under fintech laws in India.
6. Can a company hold multiple fintech licenses?
Yes, but structural separation and independent compliance are necessary for each business line.
7. How often should compliance be reviewed?
ontinuously. Fintechs must conduct periodic internal audits and regulatory reviews every quarter.
8. What are the penalties for violating fintech regulation?
Severe — from monetary fines to operational bans and public naming by RBI.
