Banks and NBFCs Begin Resetting Fintech Partnerships as RBI Data-Governance and DPDP Rules Tighten

Banks and NBFCs Begin Resetting Fintech Partnerships as RBI Data-Governance and DPDP Rules Tighten

Indian banks and non-banking financial companies are beginning a broad reassessment of their partnerships with fintech companies as tougher expectations around data governance, privacy, third-party accountability and regulatory oversight reshape how financial institutions work with external technology providers.

Banks, NBFCs and fintech companies are reviewing existing contracts and compliance structures following the Reserve Bank of India’s draft Guidance on Regulatory Expectations for Data Governance, alongside requirements arising from the Digital Personal Data Protection Act, 2023 and DPDP Rules, 2025.

The emerging reset could affect partnerships spanning digital lending, customer acquisition, data processing, cloud infrastructure, analytics, payments and other technology-enabled financial services.

The central change is straightforward:

Outsourcing technology or customer-facing processes does not outsource regulatory responsibility.

Banks and NBFCs remain accountable for risks created through third-party relationships, increasing pressure on regulated entities to understand precisely where customer data travels, who can access it and how it is protected.

Banks and NBFCs Start Reviewing Fintech Agreements

Financial institutions are weighing significant changes to existing fintech arrangements as regulatory expectations become more demanding.

The review involves more than updating privacy notices.

Institutions are examining:

• contractual responsibilities

• customer-data access

• data processing

• third-party controls

• information security

• vendor oversight

• data retention

• subcontracting arrangements

• regulatory reporting

• breach responsibilities

• audit rights

Banks and NBFCs are also engaging legal, consulting and regulatory-technology specialists as they evaluate whether existing partnerships can meet the evolving framework.

The result could be a widespread rewriting of fintech contracts across India's financial-services ecosystem.

RBI’s Data-Governance Draft Is a Major Catalyst

The RBI released its draft Guidance on Regulatory Expectations for Data Governance in July 2026.

The proposed framework applies across a broad group of regulated entities, including commercial banks, small finance banks, payments banks, cooperative banks, NBFCs, asset reconstruction companies and credit information companies.

The draft reflects the growing importance of data to financial institutions.

Modern banks no longer use data only for maintaining customer records.

Data now supports:

credit decisions,

fraud detection,

customer service,

regulatory reporting,

risk management,

payments,

artificial intelligence,

analytics,

and digital-product development.

As the financial system becomes more interconnected, weaknesses in data governance can create operational, compliance, cybersecurity and reputational risks.

Boards Could Carry Greater Data-Governance Responsibility

One of the most important elements of the RBI's approach is the elevation of data governance to a board-level issue.

Regulated entities are expected to establish a comprehensive Data Governance Framework aligned with their broader risk-management architecture.

Boards would oversee the framework and review relevant reports and metrics periodically.

This changes the organisational importance of data.

Data management can no longer be treated primarily as an information-technology function.

It increasingly becomes an enterprise governance issue involving:

senior management,

risk teams,

compliance departments,

technology leaders,

business units,

and boards.

That shift is likely to influence how fintech partnerships are approved and monitored.

Third-Party Data Risk Moves to the Centre

The most immediate impact for fintech partnerships comes from requirements surrounding third parties.

Banks and NBFCs increasingly depend on external companies for services such as:

customer onboarding,

credit assessment,

digital interfaces,

collections,

fraud detection,

data verification,

cloud computing,

payments,

and software infrastructure.

These arrangements can create complicated chains through which financial and personal information moves between organisations.

RBI's proposed approach requires regulated entities to assess data risks arising from third-party arrangements and establish appropriate controls.

For banks and NBFCs, simply trusting a vendor's internal compliance processes will increasingly be insufficient.

Data Access Could Move Toward Strict Need-to-Know Controls

The RBI's proposed governance standards emphasise limiting third-party access to data according to legitimate operational requirements.

The principle is essentially:

a vendor should access only the information required to perform its contracted function.

This could force financial institutions to reconsider broad data-sharing arrangements.

A fintech providing one specialised service may not need access to an entire customer dataset.

Banks may therefore increasingly implement:

role-based access,

data segmentation,

purpose limitations,

technical access controls,

and continuous monitoring.

Reducing unnecessary data exposure can lower both cybersecurity and privacy risks.

Non-Disclosure Obligations Become More Important

Contractual safeguards are also expected to become stronger.

Non-disclosure obligations and clearly defined data responsibilities are increasingly important components of third-party agreements.

Contracts may need to specify:

what information can be accessed,

why it can be processed,

where it can be stored,

how long it can be retained,

whether subcontractors can access it,

how security incidents must be reported,

and what happens to data when a partnership ends.

These issues could significantly increase the complexity of fintech contracting.

DPDP Framework Raises the Stakes

The regulatory reset is occurring alongside India's broader data-protection regime.

The Digital Personal Data Protection Act, 2023, together with the DPDP Rules, 2025, establishes a comprehensive framework for handling digital personal data.

Financial institutions process some of the most sensitive categories of commercially important customer information.

This can include:

identity details,

financial transactions,

contact information,

account behaviour,

borrowing history,

and digital activity associated with financial services.

Compliance failures can therefore create consequences extending beyond financial penalties.

Customer trust and institutional reputation are also at risk.

Data Fiduciaries Cannot Simply Transfer Responsibility

A critical principle under the emerging framework is that organisations responsible for determining how personal data is processed cannot eliminate their compliance responsibilities merely by engaging another company to perform the processing.

That has major implications for bank-fintech relationships.

A bank may use a fintech platform to perform part of a customer journey.

The technology may belong to the fintech.

The interface may be operated externally.

Some processing may occur outside the bank's internal infrastructure.

Yet the regulated financial institution still needs sufficient oversight and control.

This makes contractual clarity increasingly important.

RBI Outsourcing Rules Already Place Responsibility on Regulated Entities

The latest data-governance push builds on an existing regulatory foundation.

RBI's IT outsourcing framework already makes clear that outsourcing does not diminish the obligations of a regulated entity or the ultimate responsibilities of its board and senior management.

Financial institutions must assess outsourcing risks and maintain sufficient oversight over service providers.

The RBI must also retain the ability to effectively supervise regulated institutions despite outsourced arrangements.

The combination of existing outsourcing requirements, digital-lending regulation, the DPDP framework and new data-governance expectations is creating a much more comprehensive compliance environment.

Fintech Contracts Could Be Rewritten

The practical result is likely to be significant contract restructuring.

Older fintech agreements may have been negotiated when regulatory expectations around data were less detailed.

New agreements could contain substantially stronger provisions covering:

data ownership,

processing limitations,

security standards,

incident notification,

subcontractors,

auditing,

data deletion,

regulatory access,

business continuity,

and termination procedures.

Banks and NBFCs may also demand stronger warranties from technology partners regarding compliance with applicable privacy and cybersecurity requirements.

Fintech Vendor Due Diligence Could Become Tougher

Financial institutions are also likely to increase scrutiny before onboarding new fintech partners.

The evaluation may extend well beyond the commercial quality of a product.

Banks could examine:

governance structures,

cybersecurity maturity,

data architecture,

privacy controls,

cloud arrangements,

subcontractors,

financial stability,

business continuity,

regulatory history,

and incident-response capabilities.

A fintech with an innovative product but weak governance could therefore find it increasingly difficult to secure partnerships with regulated institutions.

Existing Partnerships Face Compliance Diagnostics

The challenge is not limited to future deals.

Existing partnerships are also being evaluated.

Banks and NBFCs may need to determine whether arrangements created several years ago still meet today's expectations.

That could involve mapping:

which systems hold customer information,

how information moves between organisations,

which employees can access it,

whether copies exist across multiple databases,

and whether data is retained longer than necessary.

For large financial institutions with hundreds of technology vendors, this can become an extensive exercise.

Legacy Data Architecture Creates a Major Challenge

Traditional financial institutions face another complication: legacy technology.

Large banks and NBFCs may have accumulated data across multiple systems over decades.

Customer information can reside in separate platforms supporting:

core banking,

credit cards,

loans,

payments,

collections,

customer relationship management,

analytics,

and mobile applications.

Fintech integrations add another layer.

Creating a unified view of where data resides and how it is used can therefore require significant architectural changes.

Compliance is not merely a legal-documentation exercise.

For many institutions, it is also a major technology-modernisation project.

Fintechs Will Need Compliance by Design

For fintech companies, the regulatory shift could change how products are built.

Historically, a startup might develop a product first and strengthen governance as the business grew.

That approach becomes harder when prospective bank partners expect compliance capabilities before signing a contract.

Fintech products may increasingly need:

privacy controls,

access management,

audit trails,

data minimisation,

consent management,

encryption,

security monitoring,

and deletion mechanisms

built directly into their architecture.

This is often described as compliance by design.

Retrofitting Compliance Can Be Expensive

Building governance into a new product is generally easier than rebuilding an established platform around new requirements.

A fintech that stores information across loosely connected databases may need substantial engineering work to create consistent controls.

Similarly, changing how data is collected or shared can affect:

product functionality,

analytics,

customer journeys,

machine-learning systems,

and commercial partnerships.

The cost of compliance therefore includes much more than legal expenses.

It can involve significant product and engineering investment.

Digital Lending Partnerships Face Particular Scrutiny

Digital lending represents one of the most important areas affected by tighter oversight.

Fintechs frequently operate as Lending Service Providers for banks and NBFCs.

They may support:

customer acquisition,

loan comparison,

credit assessment,

documentation,

servicing,

and collections.

RBI's Digital Lending Directions already establish detailed responsibilities for regulated entity-LSP arrangements and customer protection.

The broader data-governance framework adds another layer to those obligations.

Banks must understand not only what a fintech does but also how customer information is handled throughout the process.

Subcontractors Create Another Layer of Risk

Fintech companies themselves frequently depend on external vendors.

A single digital-finance product may involve:

cloud providers,

identity-verification companies,

analytics vendors,

communications platforms,

payment processors,

and cybersecurity services.

This creates what is sometimes called fourth-party risk.

A bank may contract with one fintech, but customer information could indirectly interact with several additional service providers.

Regulated entities will therefore need better visibility into subcontracting chains.

Cybersecurity and Privacy Are Converging

Historically, cybersecurity and privacy were often managed as related but separate issues.

The emerging regulatory environment increasingly connects them.

A financial institution cannot claim strong privacy protection if customer data is technically insecure.

Likewise, cybersecurity controls need to account for whether data should have been collected, retained or shared in the first place.

Banks and NBFCs are therefore likely to bring together:

cybersecurity,

privacy,

data governance,

operational risk,

vendor management,

and compliance.

That could reshape internal organisational structures as well as fintech partnerships.

RegTech Could Benefit From the Compliance Shift

The regulatory reset could create opportunities for regulatory-technology companies.

Banks and fintechs increasingly need tools capable of managing:

consent,

vendor risk,

data inventories,

access controls,

compliance monitoring,

audit trails,

privacy requests,

and regulatory reporting.

Large institutions may find manual compliance processes increasingly difficult as the number of systems and third-party relationships expands.

Automation could therefore become an important part of the response.

Smaller Fintechs Could Face Greater Pressure

The transition may be particularly challenging for smaller fintech companies.

Large technology companies can maintain dedicated:

legal teams,

compliance departments,

cybersecurity specialists,

data-protection professionals,

and internal auditors.

Early-stage companies often cannot.

If banks impose increasingly rigorous due-diligence requirements, smaller fintechs may need to invest significantly in governance before achieving meaningful revenue.

That could increase the cost of entering regulated financial-services markets.

Strong Governance Could Become a Competitive Advantage

The same changes could benefit fintechs that invest early in compliance.

When banks compare potential partners, product capabilities may no longer be the only deciding factor.

A fintech able to demonstrate strong:

data governance,

cybersecurity,

regulatory readiness,

auditability,

and risk controls

could have a meaningful advantage.

Compliance may therefore evolve from being viewed mainly as a cost centre into a commercial differentiator.

Funding Could Become More Selective

The shift comes as India's fintech funding environment has already become more selective.

Investors are increasingly scrutinising the sustainability of business models, regulatory exposure and the cost of achieving compliance.

Companies dependent on regulatory gaps or unusually permissive data practices may find fundraising more difficult.

By contrast, businesses operating in areas such as:

RegTech,

cybersecurity,

compliance automation,

risk analytics,

and privacy infrastructure

could benefit from growing institutional demand.

The Bank-Fintech Relationship Is Maturing

The broader transformation reflects the maturation of India's fintech ecosystem.

The first phase of fintech growth was driven heavily by speed.

Startups could build products quickly, acquire customers digitally and partner with financial institutions to distribute services.

The next phase places greater emphasis on:

resilience,

accountability,

governance,

security,

and regulatory sustainability.

Banks still need fintech innovation.

Fintechs still need access to regulated financial infrastructure.

But partnerships are increasingly likely to operate under more formal and demanding governance structures.

Conclusion

Banks and NBFCs are beginning a significant reset of their fintech partnerships as RBI data-governance expectations and India's DPDP framework increase accountability for customer information and third-party risk.

The changes could lead to rewritten contracts, stricter vendor due diligence, tighter need-to-know data access, stronger confidentiality obligations and more extensive monitoring of fintechs and their subcontractors.

For regulated institutions, the central principle is increasingly clear: using an external technology provider does not transfer responsibility for regulatory compliance or customer-data protection.

For fintech companies, this means governance must become part of product architecture rather than an issue addressed only after achieving scale.

The adjustment will increase compliance costs and could make partnerships more demanding, particularly for smaller fintechs. But it could also strengthen trust across India's digital-finance ecosystem.

The next generation of bank-fintech partnerships is therefore likely to be defined not simply by how quickly companies can innovate, but by how securely, transparently and responsibly that innovation can operate at scale.