As we wrap up 2025, we’re looking back at an immensely fulfilling yet equally chaotic year for Indian fintechs.
This year brought with it a quiet shift away from rapid scaling and experimentation to building resilient, long-term infrastructure. The primary objective is no longer just how fast a product can grow, but how it fits within an increasingly sophisticated regulatory framework designed to mitigate systemic risk.
Here is our review of the year that was, the mood of the room right now, and what we see on the horizon for 2026.
The Past: 2025 Regulatory Timeline
The regulatory calendar in 2025 was relentless but intentional. Here are the major milestones and how they reshaped the ecosystem:
- May 2025 | Digital Lending Directions: The year began with a peek into how the RBI views digital lending risk in practice. The Digital Lending Directions, 2025 introduced clear conduct, monitoring, and reporting rules for regulated entities (REs), and strengthened oversight responsibility to the fintechs they partner with.
- May 2025 | The PRB Notification: A long-awaited institutional shift came with the official notification of the Payments Regulatory Board (PRB). It replaced the Board for Regulation and Supervision of Payment and Settlement System (BPSS) and as a googly, included three external members from the central government. This moved payments oversight from a purely departmental function of the RBI to more specialized, multi-stakeholder scrutiny.
- June 2025 | KYC Refresh: The KYC changes focused on reducing friction and advancing a digital-first approach. Low-risk accounts were allowed to continue transacting even if re-KYC was overdue, provided they followed timeline and monitoring requirements. To ease last-mile compliance, REs were permitted to use business correspondents for limited KYC updates, including address changes. The RBI also tightened process discipline by mandating clear advance notices and reminders, and by requiring the CKYCR to be the first step in onboarding. Overall, the shift was towards simpler updates, better communication, and lifecycle-based KYC.
- August 2025 | FREE-AI Report: The FREE-AI report acknowledged the reality that AI is already embedded in credit underwriting, fraud detection, and customer support. It set sutras for ethical AI supported by 26 recommendations that mandate board-approved AI policies and regular fairness audits to mitigate algorithmic bias. The report made it clear that if AI-driven decisions cause consumer harm, accountability will sit with the REs, not algorithms.
- September 2025 | PA Master Direction: The Payment Aggregator Master Direction (PA-MD) was one of the most disruptive regulatory changes of the year. It tightened fund-flow rules, imposed stronger governance and net worth requirements, and expanded due diligence obligations. Now, PAs can only process payments for merchants they contractual relationships with, and must do full KYC for all large merchants. The split settlement model (settling to any account on the direction of the merchant) has been restricted to large merchants. Quite a few existing models, like BNPL, had to be reworked to ensure compliance.
- November 2025 | The Great Consolidation: In a massive effort to reduce the compliance burden, the RBI completed its consolidation exercise, merging thousands of disparate circulars into a navigable set of unified Master Directions.
- November 2025 | DPDP Rules Notified: With the DPDP Rules in force, data protection compliance moved from planning to execution. Fintechs had to operationalise consent management, purpose limitation, breach reporting, and processor obligations. Data governance became a board-level issue, particularly for firms handling financial and behavioural data at scale.
- December 2025 | Payment Licenses Galore: The final weeks of 2025 brought some welcome momentum, with the RBI clearing long-pending licensing applications. A wide set of players received regulatory approvals across payment roles, specifically the three channels of payment aggregation.
The Present: Market and Regulatory Pulse
Fintechs are prioritizing long-term stability, shifting the industry focus from raw scale to using compliance as a competitive advantage. The regulatory thinking runs in parallel with the recent efforts to clarify and settle core frameworks across lending, payments, KYC, and data protection. At the same time, regulators have shown a clear appetite for innovation, whether by recognising AI-led decision-making, easing KYC frictions or continuing engagement with industry through consultative processes.
The Future: A Wishlist for 2026
- Monetization of UPI: Identifying sustainable monetization pathways for UPI has been a long-standing industry ask. 2026 may see this in action, either through fees on peer-to-merchant (P2M) transactions or by monetizing specific use-cases on the UPI rails.
- NBFCs Joining the UPI Party: Broader participation in UPI-linked credit is high on the wishlist. Currently, only banks can issue pre-sanctioned credit lines on UPI. There is a strong case to allow NBFCs into this space. With their deep networks in underserved segments and criticality in financial innovation, such inclusion could meaningfully deepen credit access.
- Structured Regulatory Engagement: The industry has voiced the need for more structured engagement from the RBI, beyond its ‘Finquiry’ initiative. A consistent channel similar to SEBI’s Informal Guidance Scheme could allay uncertainty and speed up innovation.
- Full-stack digital banks: Calls to enabling full-stack digital banks through tailored regulation have been making rounds. Operating entirely online and slashing operating costs, they could boost financial inclusion in 2026.
- KYC Reforms: It has been a happening year for KYC. We have a few more items to check off our checklist:
o Enhancing CKYCR: There have concerns about the quality and duplication of CKYCR records. Assigning confidence scores, de-duplicating mechanisms, and exploring blockchain-based solutions could improve reliability and efficiency.
o Aadhaar OTP-Based Online KYC: Relaxing RBI restrictions on balances and mandatory re-KYC for low-risk accounts verified through this route could make onboarding smoother and more convenient.
o Uniform KYC framework: With different regulators prescribing separate KYC rules, customer verification often cannot be reused. A uniform KYC framework can reduce costs and simplify onboarding.
o KYC by PAs: The industry has been concerned about the full KYC requirements for PAs in the new PA-MD. We may see some relaxation, where for already KYC’d bank accounts, the RBI could allow lighter measures.
- Digital Gold: Digital Gold’s popularity skyrocketed towards late 2025, offering fractional access to a traditionally illiquid asset. However, it still remains unregulated. 2026 could bring a clear regulatory framework to boost consumer confidence and market growth.
2025 was the year of the rulebook. 2026 will be the year of the player. At Ikigai Law, we’re excited to navigate what's next.
What is your biggest fintech priority for the new year? Let’s start the conversation below.
Image credits: AI generated
Author Credits: Fintech Team - Aparajita, Astha, Samyukta
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