The Reserve Bank of India (RBI) Governor, Sanjay Malhotra, emphasised the importance of fintech companies engaging early with regulatory authorities rather than expanding their operations by exploiting gaps in the existing regulatory framework. Speaking on September 10, 2026, at the Global FinTech Fest, Malhotra cautioned against the strategy of scaling business before clarifying regulatory requirements. He urged companies to take a proactive approach by consulting with regulators during the development of new financial products.

Malhotra specifically addressed the mindset where businesses are structured around regulatory loopholes while seeking clarity or forgiveness retrospectively. He noted, “I would gently caution against a mindset of structuring a business around the gaps between regulatory categories.” This indicates a clear direction for fintech firms to prioritize compliance as they innovate.

The Governor also highlighted that the RBI has established regulatory sandboxes and pilot programmes designed to facilitate early engagement between innovators and regulators. “The sandbox and pilot mechanisms exist precisely so that innovators can engage with us early, ask questions, and test their assumptions under supervision,” he remarked, pointing to the RBI’s commitment to fostering innovation while ensuring consumer protection.

Implications of Growth on Fintech Responsibilities

As fintech companies expand, Malhotra warned that their responsibilities towards the financial system intensify. He explained that while many fintech firms may initially operate outside prudential regulations, larger businesses that could potentially influence the financial ecosystem must adhere to higher standards. “I would describe this as the obligation to be not just too big to fail, but too significant to be careless,” he stated.

This observation underlines the need for increased operational resilience and accountability, particularly as these firms grow in size and influence. Malhotra drew attention to crucial aspects, such as business continuity and cybersecurity, which he referred to as “the price of the scale a firm has achieved.” This highlights the necessity for fintech firms to integrate robust risk management strategies.

Furthermore, the Governor reiterated the RBI’s regulatory approach, which operates on the principle of “same activity, same risk, same regulatory treatment.” This ensures that all entities, regardless of size, face similar regulatory scrutiny tailored to their capacities, allowing for a balanced and equitable oversight framework.

Data Protection and Strategic Partnership with RBI

Governor Malhotra urged fintech companies to prioritise customer data protection as a critical responsibility rather than simply viewing it as a monetisable asset. “I would urge all of you to treat data as a fiduciary responsibility, not as a business asset,” he asserted. This statement reinforces the need for ethical data collection practices, where firms clearly define the purpose for which customer data is utilised and ensure it is safeguarded within the confines of user consent.

In the context of innovation in the financial sector, the RBI regards fintech organisations as strategic partners in leveraging advanced technologies to develop a stable, inclusive, and efficient financial system. Malhotra’s comments further underscore the collaborative nature of the RBI’s relationship with fintech companies, aiming for a regulatory landscape that supports sustainable financial growth.

Additionally, he announced the formal recognition of the United Fintech Forum as the second self-regulatory organisation within the fintech industry. This step reflects the RBI’s commitment to fostering an environment where self-regulation can flourish alongside established regulatory frameworks.

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