Mumbai (Maharashtra) [India], September 10 : Reserve Bank of India Governor Sanjay Malhotra on Thursday advised fintech firms against expanding their businesses by taking advantage of gaps between regulatory categories, and urged companies to engage with regulators early as they develop and scale new products.
Speaking at the Global FinTech Fest 2026, Malhotra cautioned fintech companies against adopting an approach of expanding first and seeking regulatory clarity later.
“I would gently caution against a mindset of structuring a business around the gaps between regulatory categories, of scaling first and seeking clarity or forgiveness later,” Malhotra said.
He said regulatory sandboxes and pilot mechanisms have been created to allow innovators to engage with the regulator at an early stage, test products and help develop workable rules.
“The sandbox and pilot mechanism that we have built exist precisely so that the innovators can engage with us early, ask questions, test assumptions under supervision, and shape rules that are workable for genuine innovation,” he said.
Malhotra said transparent engagement with regulators could provide companies with a more durable path to expansion, while attempts to stay ahead of regulations could eventually prove costly.
“A firm that seeks to outrun the rule typically finds sooner or later that the rules catch up at a much higher price to itself and to the trust of the consumers themselves,” he said.
The Governor also said the responsibility of fintech companies towards the financial system should increase as their businesses become larger.
He said while many fintech firms may remain outside the perimeter of prudential regulation during their early stages, a company whose payments business, lending book or user base becomes large enough to potentially affect the financial system has responsibilities beyond its own balance sheet.
“I would describe this as the obligation to be not just too big to fail, but too significant to be careless,” Malhotra said, adding that operational resilience, business continuity and cybersecurity are “the price of the scale a firm has achieved.”
Explaining the RBI’s regulatory approach, Malhotra said the central bank follows the principle of “same activity, same risk, same regulatory treatment” irrespective of who performs an activity, while taking into account the capacity of different entities.
“We try to keep regulation light touch where innovation is nascent and risk contained and step in our regulation only when activity grows to scale or consumer conduct related issues become important,” he said.
Malhotra also urged fintech companies to treat customer data as a responsibility rather than merely an asset that can be monetised.
“I would urge all of you to treat data as a fiduciary responsibility, not as a business asset,” he said, adding that data should be collected for a clear purpose, used within the consent provided by customers and adequately protected.
The Governor said the RBI views fintech as a strategic partner in using new technologies to build a stable, efficient and inclusive financial system. He also announced the recognition of United Fintech Forum as the second self-regulatory organisation in the fintech sector.