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NyayaAI

Banking, Financial Services & Fintech: statutory compliance in India

NBFC licensing and scale-based regulation, digital lending, payment aggregators, KYC/AML under the PMLA, SARFAESI enforcement and DRT recovery.

What this covers

8 regulators, 12 key statutes and 16 compliance obligations, plus 10 common dispute types and 21 due-diligence checks. 6 entries are marked for verification because the rule is state-specific, recently amended, or commenced in stages — those say what to check rather than stating a date we cannot stand behind.

Who regulates this sector

RegulatorWhat it decides
Reserve Bank of India (RBI)Bank and NBFC licensing, prudential norms, digital lending, payment systems, KYC master directions, outsourcing and IT governance.
Securities and Exchange Board of India (SEBI)Listed NBFCs, debenture issuance, investment advisers, AIFs and portfolio managers.
Insurance Regulatory and Development Authority of India (IRDAI)Insurers, corporate agents and bancassurance arrangements.
Financial Intelligence Unit - India (FIU-IND)Receives CTR, STR, CCR and NTR reports from reporting entities under the PMLA; imposes penalties for reporting failures.
National Payments Corporation of India (NPCI)UPI, IMPS, NACH, RuPay circulars and participant onboarding — contractual rather than statutory, but operationally binding.
Debts Recovery Tribunal and Appellate Tribunal (DRT / DRAT)Recovery applications by banks and financial institutions, and borrower applications against SARFAESI measures.
National Company Law Tribunal (NCLT)Corporate insolvency, and the forum a financial creditor uses when SARFAESI will not reach the asset.
International Financial Services Centres Authority (IFSCA)Unified regulator for banking, funds, insurance and fintech in GIFT City.

Key statutes

StatuteYearWhy it matters
Reserve Bank of India Act1934Section 45-IA — no NBFC may commence or carry on business without a certificate of registration and the prescribed net owned fund. Chapter III-B is the source of most NBFC directions.
Banking Regulation Act1949Licensing of banks, the permitted forms of business under section 6, and the RBI's power of direction and supersession.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act2002Enforcement without a court: a section 13(2) notice giving 60 days, measures under section 13(4), District Magistrate assistance under section 14, and the borrower's route to the DRT under section 17 within 45 days.
Recovery of Debts and Bankruptcy Act1993The DRT's original jurisdiction over recovery applications by banks and financial institutions above the notified threshold.
Prevention of Money-Laundering Act2002Reporting-entity obligations — customer identification, record-keeping for five years, and CTR/STR reporting to FIU-IND under the PML (Maintenance of Records) Rules, 2005.
Payment and Settlement Systems Act2007Section 4 — no payment system may be operated without RBI authorisation. Payment aggregators, PPI issuers and cross-border payment operators all sit here.
Negotiable Instruments Act1881Section 138 remains the workhorse recovery route for small and mid-ticket lending, with unforgiving limitation steps.
Insolvency and Bankruptcy Code2016Section 7 for financial creditors, the Rs 1 crore default threshold, and the moratorium that stops SARFAESI enforcement in its tracks.
Credit Information Companies (Regulation) Act2005Membership of credit bureaus, accuracy of reporting, and the consumer's rectification rights — a growing source of complaints and compensation orders.
Foreign Exchange Management Act1999FDI in NBFCs and fintech, ECB borrowing, and the reporting forms (FC-GPR, FC-TRS, ECB-2) that a funding round triggers.
Banning of Unregulated Deposit Schemes Act2019Criminalises accepting deposits outside the regulated list — the statute that catches informal lending, chit-like schemes and some 'community savings' fintech products.
Digital Personal Data Protection Act2023Consent, purpose limitation and breach notification for the very large personal datasets lending and payments generate. — verify: The Act is enacted; the Rules and the phased commencement dates determine when specific obligations bite. Confirm the current commencement position.

Compliance obligations

ObligationFormWhenIf missedAuthority
Cash Transaction Report to FIU-INDCTRMonthly. By the 15th of the month following the month of the transactions.Monetary penalty on the reporting entity and its designated director under section 13 of the PMLA.PML (Maintenance of Records) Rules, 2005 Rule 8
Suspicious Transaction Report to FIU-INDSTROn the trigger event. Within seven working days of arriving at a conclusion that a transaction is suspicious.Penalty under section 13; and tipping off the customer is separately prohibited.PML (Maintenance of Records) Rules, 2005 Rule 8
Upload KYC records to the Central KYC Records RegistryCKYC templateOn the trigger event. Within ten days of commencement of an account-based relationship.Reporting failure under the PMLA rules and an RBI supervisory finding on KYC quality.PML (Maintenance of Records) Rules, 2005 Rule 9(1A)
Periodic updation of KYCOn the trigger event. At least once every two years for high-risk customers, eight years for medium risk and ten years for low risk, from the date of last KYC.Accounts have to be restricted or frozen, which produces both customer complaints and a supervisory finding.RBI Master Direction — Know Your Customer
Report a cyber security incident to CERT-InOn the trigger event. Within six hours of noticing or being brought to notice of any incident in the specified list.Punishable under section 70B(7) of the IT Act, 2000; and it is the first thing asked for in any RBI or FIU follow-up.CERT-In Directions dated 28 April 2022 under section 70B(6), IT Act, 2000
Foreign Liabilities and Assets returnFLAAnnual. By 15 July each year, for entities that have received FDI or made overseas investment in any previous year.Treated as a contravention of FEMA, compoundable with a penalty.FEMA, 1999; RBI FLA return directions
Report issue of shares to a non-residentFC-GPR (on FIRMS)On the trigger event. Within 30 days of allotment.Late Submission Fee, and the round is not clean for the next diligence.FEM (Non-debt Instruments) Rules, 2019; RBI Master Direction on Reporting
Report transfer of shares between a resident and a non-residentFC-TRS (on FIRMS)On the trigger event. Within 60 days of transfer of shares or receipt or remittance of consideration, whichever is earlier.Late Submission Fee; unreported secondaries are a standard diligence exception.FEM (Non-debt Instruments) Rules, 2019
NBFC supervisory returns to the RBI (verify: Return names, periodicity and the filing window depend on the NBFC layer and have been migrating to the RBI's CIMS platform. Confirm the current return list for the client's layer.)DNBS series on the RBI's reporting platformQuarterly. Monthly, quarterly and annual returns depending on the NBFC's layer under scale-based regulation.Supervisory action and monetary penalty under section 58B of the RBI Act for delayed or incorrect returns.RBI Master Direction — Returns to be submitted by NBFCs
Statutory Auditor's Certificate on continued eligibility (verify: Confirm the current form and due date on the RBI reporting platform; this requirement has been re-stated across successive master directions.)SACAnnual. Submit online within one month of finalisation of the balance sheet and in any case by 31 December.A supervisory red flag on registration eligibility, since the certificate is what evidences continued principal-business compliance.RBI Master Direction — Returns to be submitted by NBFCs
Submit borrower data to all credit information companies (verify: The move to fortnightly reporting and the associated compensation framework changed the cycle. Confirm the current periodicity and cut-off dates.)Monthly. On the periodicity fixed by the RBI, which was moved from monthly to fortnightly reporting.Compensation payable to consumers for delayed correction of credit records, and penalties on the credit institution.Credit Information Companies (Regulation) Act, 2005; RBI directions on credit information reporting
System audit report for a payment aggregator or PPI issuer (verify: The submission date is set in the entity's authorisation letter and the applicable circular. Replace this placeholder with the client's actual condition.)System audit report by a CERT-In empanelled auditorAnnual. Annually, submitted to the RBI within the period stated in the authorisation conditions.Authorisation conditions are breached, and the RBI has restricted onboarding of new merchants for exactly this.RBI Guidelines on Regulation of Payment Aggregators and Payment Gateways
Net worth certification for a payment aggregator (verify: Confirm the certification date required by the client's authorisation; the net worth figures themselves are settled.)Chartered accountant's net worth certificateAnnual. Rs 15 crore net worth at application and Rs 25 crore by the end of the third financial year of grant of authorisation, maintained thereafter.Failure to maintain net worth is a ground to refuse or withdraw authorisation.RBI Guidelines on Regulation of Payment Aggregators and Payment Gateways
Annual board review of the regulatory policy setAnnual. Fair Practices Code, interest rate model, KYC/AML policy, outsourcing policy, IT governance policy, grievance redressal policy and recovery agent policy reviewed and re-approved by the board.The absence of a current board-approved policy is the finding that turns a customer complaint into a supervisory action.RBI Master Directions (Scale Based Regulation, KYC, Outsourcing, IT Governance)
Section 13(2) demand notice before enforcementDemand notice under section 13(2)On the trigger event. After classification as a non-performing asset, give the borrower 60 days to discharge; reply to any section 13(3A) representation within 15 days.Enforcement measures taken without a valid notice or without dealing with the representation are routinely set aside by the DRT.SARFAESI Act, 2002 sections 13(2) and 13(3A)
Cheque dishonour — statutory stepsOn the trigger event. Present within three months of the cheque's date; demand notice within 30 days of the dishonour memo; wait 15 days; file the complaint within one month of that period expiring.Miss any step and the complaint is not maintainable, with only a limited power to condone the delay in filing.Negotiable Instruments Act, 1881 sections 138 and 142

Where disputes in this sector are heard

DisputeForumNote
Borrower challenge to SARFAESI measuresDebts Recovery Tribunal under section 17, appeal to DRATApplication within 45 days of the measure; the DRAT appeal needs a pre-deposit of 50% of the debt, reducible to 25%.
Bank recovery of debtDebts Recovery TribunalOriginal application by a bank or financial institution above the notified pecuniary threshold.
Corporate insolvency for financial defaultNCLT, appeal to NCLATSection 7 application; the moratorium under section 14 stops SARFAESI and all other enforcement.
Personal guarantor insolvencyNCLT for guarantors to corporate debtorsA parallel and increasingly used route where the corporate estate is empty.
Cheque dishonour prosecutionsMagistrate's court under section 138 of the NI ActVolume litigation; compounding and mediation are actively encouraged by the courts.
Complaints against banks and NBFCsRBI Integrated Ombudsman Scheme, then the Appellate AuthorityFree to the complainant; an award is binding on the regulated entity unless appealed.
Credit information disputesConsumer commissions and the RBI OmbudsmanCompensation has been awarded for delayed correction of credit reports.
Challenges to RBI directions and penaltiesHigh Court, writ jurisdictionA narrow review — courts are slow to second-guess prudential judgement.
Fraud classification and wilful defaulter proceedingsHigh Court writ, after the internal committee processNatural justice — the borrower must be heard before classification.
Commercial disputes with fintech partnersArbitration, or the Commercial CourtsUsually about revenue share, DLG invocation and data ownership on termination.

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