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Introduction
As 2025 draws to a close, India's fintech and financial services ecosystem has continued to evolve at a rapid pace.
On the capital markets front, the Securities and Exchange Board of India ("SEBI") intensified its regulatory agenda through a series of governance, compliance, and investor protection measures. These include strengthened governance norms for digital accessibility requirements, new certification obligations for compliance officers of alternative investment fund ("AIF") managers, and initiatives to improve the integrity of market disclosures, such as the launch of the Past Risk and Return Verification Agency.
Meanwhile, other sectoral regulators continued to refine regulatory frameworks through clarifications, FAQs, and operational relaxations, while market developments during the month reflected continued regulatory approvals across payments, and lending, alongside sustained deal activity in the fintech sector.
This edition of the newsletter captures the key regulatory, market, and industry developments from December 2025 shaping India's fintech and financial services landscape.
Regulatory Roundup
NSE and BSE clarify scope of referral arrangements for
banking products by trading members (Link) and (Link)
The National Stock Exchange of India Limited
("NSE") and BSE Limited
("BSE") (collectively referred to as
"Exchanges") on December 24, 2025, have
issued a clarification in relation to the distribution of
third-party products by trading members.
The Exchanges had, through a circular dated June 16, 2025,i issued guidelines on the distribution of third-party products by trading members. Subsequently, through a clarification dated December 22, 2025ii, it was clarified that stockbrokers are not permitted to engage, as distributors, in any lending products such as home loans, vehicle loans, personal loans, education loans, loans against securities, or similar products, other than those specifically permitted by SEBI from time to time.
In view of the above, the Exchanges have further clarified that references on the applications or platforms of stockbrokers to banking products offered by banks or non-banking financial companies shall be permitted where such references are in the nature of referral arrangements and are subject to compliance with the applicable third-party product guidelines.
IFSCA issues FAQs under the IFSCA (TechFin and Ancillary Services) Regulations, 2025
The International Financial Services Centres Authority ("IFSCA") released a set of Frequently Asked Questions ("FAQs") under the IFSCA (TechFin and Ancillary Services) Regulations, 2025 ("TAS Regulations"), to provide clarity on the regulatory and procedural framework applicable to entities proposing to provide TechFin Services and/or Ancillary Services from the International Financial Services Centre.
TechFin Services are technology-based solutions or services, such as software platforms, digital tools, or IT-enabled systems, that help support or facilitate the provision of financial services, without the provider itself offering any regulated financial service. Ancillary Services are non-technology support services that, directly or indirectly, aid or assist in making arrangements for carrying on financial services, such as operational, administrative, or support functions.
Entities registered as TechFin and Ancillary Service Providers are permitted to offer only these supporting services and are not allowed to undertake any regulated financial services themselves.
The FAQs, inter alia, clarify:
- eligibility and legal forms of entities that may apply for a Certificate of Registration ("CoR"), including companies, LLPs, branches and certain partnership firms;
- migration and registration requirements for existing Ancillary Service Providers and TechFin entities operating under erstwhile frameworks;
- timelines and consequences relating to obtaining a CoR under the TAS Regulations; and
- key compliance requirements, including appointment of principal and compliance officers and fee-related obligations.
TRAI directs mandatory adoption of 1600-series numbers by IRDAI-regulated entities
The Telecom Regulatory Authority of India ("TRAI") issued a direction dated December 16, 2025, mandating the adoption of the 1600-numbering series for service and transactional voice calls by entities regulated by the Insurance Regulatory and Development Authority of India ("IRDAI").
By way of background, the Department of Telecommunications had, through a communication dated December 23, 2024, allocated the 1600-series as a dedicated numbering series for service and transactional voice calls by Government entities and entities operating in the banking, financial services, and insurance sector. Subsequently, access providers were directed to initiate allocation of the said numbering series to eligible entities. TRAI observed that, despite consumer awareness initiatives, adoption of the 1600-series by regulated entities remained limited, with continued use of 10 (ten) digit mobile numbers for service and transactional calls.
In view of the above, and based on timelines furnished by the IRDAI, TRAI has directed access providers to ensure that entities regulated by IRDAI complete adoption of the 1600-series by February 15, 2026. With effect from this date, IRDAI-regulated entities are not permitted to initiate service or transactional voice calls from any numbers other than those allotted under the 1600-series, even where customer consent has been obtained.
Further, in the event of complaints relating to unsolicited commercial communications against entities that fail to adopt the 1600-series within the prescribed timeline, regulatory action shall be taken in accordance with the applicable provisions governing unregistered telemarketers.
Access providers have also been directed to furnish a status report to TRAI within 15 (fifteen) days from the date of issuance of the direction, and to submit periodic updates thereafter on the operationalisation of the 1600-series by IRDAI-regulated principal entities.
SEBI relaxes geo-tagging requirement in India for NRIs undertaking re-KYC
SEBI issued a circular on December 10, 2025, relaxing the geo-tagging requirement for Non-Resident Indians ("NRIs") while undertaking re-Know Your Customer ("re-KYC") through digital modes. SEBI has modified the Master Circular on KYC dated October 12, 2023 to include (i) relaxation of the requirement that the physical location of the client be in India at the time of re-KYC; and (ii) a requirement that the app ensures the GPS location captured matches the country stated in the client's proof of address and prevents connections from spoofed IP addresses.
SEBI defers implementation timeline for Phase III of nomination framework
SEBI, through a circular dated December 11, 2025, has deferred the implementation timeline for Phase III of the nomination framework introduced under its circular on "Revise and Revamp Nomination Facilities in the Indian Securities Market" dated January 10, 2025 ("Nomination Circular").iii
The Nomination Circular introduced a comprehensive revamp of nomination norms applicable to demat accounts and mutual fund folios, including mandatory nomination requirements for single holdings, expanded options for multiple nominees, revised transmission procedures, and enhanced safeguards to reduce unclaimed assets in the securities market. The framework was implemented in a phased manner pursuant to subsequent circulars dated February 28, 2025 and July 30, 2025.
Phase III of the framework, which primarily relates to system-driven and process-intensive changes, including enhanced nomination capture, transmission workflows, and related operational modifications by depositories, asset management companies, registrars, and depository participants, was earlier scheduled to be implemented from December 15, 2025.
SEBI has now deferred the implementation of Phase III to a further date to be notified separately, in view of representations received from stakeholders seeking additional time for system development and process changes.
SEBI introduces SWAGAT-FI framework across FVCI and FPI regulations(Link) and (Link)
SEBI, has notified amendments to the SEBI (Foreign Venture Capital Investors) Regulations, 2000 and the SEBI (Foreign Portfolio Investors) Regulations, 2019 (collectively referred to as "Amendment Regulations"), introducing the framework for "Single Window Automatic and Generalised Access for Trusted Foreign Investor" ("SWAGAT-FI").
The Amendment Regulations, inter alia:
- introduce the SWAGAT-FI framework and define the categories of foreign investors eligible to be classified as SWAGAT-FIs, including specified government and government-related investors and public retail funds, subject to conditions prescribed by SEBI;
- permit mutual funds registered with SEBI to be constituents of foreign portfolio investor applicants, subject to conditions; and
- rationalise the registration and renewal fee framework for SWAGAT-FIs by introducing a 10 (ten) year block-based fee structure, with registration and renewal fees payable in advance at the beginning of each 10 (ten) year block.
SEBI seeks public comments on review of trading member position limits in equity derivatives
SEBI, through a consultation paper issued on December 04, 2025, has sought public comments on the review of the existing position limits applicable to trading members in the equity derivatives segment.
By way of background, SEBI had, vide circular dated May 29, 2025, revised the client position limits for index futures and options from a notional contract value–based metric to a futures equivalent ("FutEq") / delta-adjusted metric. However, the position limits applicable to trading members for index options, last prescribed by SEBI through a circular dated October 15, 2024, continue to be computed based on notional contract value, resulting in a lack of alignment between the metrics used at the client and trading member levels.
The consultation paper proposes to align the trading member–level position limits for index options with the FutEq / delta-adjusted framework currently applicable at the client level. It also highlights market integrity concerns arising from the existing absolute trading member limit of INR 7,500 (Indian Rupees seven thousand and five hundred) crore or 15% (fifteen percent) of open interest, particularly in index derivatives with relatively low open interest, and examines the introduction of a slab-based absolute limit structure for different levels of market liquidity.
The proposals further contemplate enabling trading members to compute and monitor their FutEq positions on an intraday basis to allow timely risk management and compliance with the proposed limits. Public comments on the proposals set out in the draft circular are invited up to December 26, 2025.
CDSL informs DPs of TRAI direction mandating pre-tagging of variables in SMS content templates
Central Depository Services (India) Limited ("CDSL"), through a communiqué dated December 01, 2025, has informed depository participants ("DPs") of a direction issued by the TRAI dated November 18, 2025, prescribing mandatory measures to curb misuse of headers and SMS content templates under the Telecom Commercial Communications Customer Preference Regulations, 2018.
The TRAI direction, inter alia:
- mandates pre-tagging of every variable field in SMS content templates with descriptive labels specifying content type, purpose, and validation criteria;
- requires compulsory scrubbing and validation of tagged variables against pre-whitelisted URLs, OTT/APK links, and callback numbers; and
- provides for rejection of non-compliant messages after the expiry of the prescribed compliance window.
TRAI has prescribed the following implementation timelines:
- within 10 (ten) days of the direction: all newly registered SMS templates must comply with mandatory variable pre-tagging prior to approval;
- within 30 (thirty) days of the direction: access providers must commence automated scrubbing and validation of tagged variables;
- within 60 (sixty) days from commencement of scrubbing: all existing SMS content templates must be updated to comply with the prescribed pre-tagging standards; and
- during the initial 60 (sixty) day scrubbing period: messages may be processed in logger mode, after which messages failing variable-tag validation shall be rejected outright.
Depository participants have been advised to take note of the TRAI direction and ensure timely compliance with the prescribed timelines and operational requirements.
SEBI prescribes modalities for migration to AI-only schemes and relaxations for LVFs
SEBI, through a circular dated December 08, 2025, has prescribed the modalities for migration of existing AIF schemes to accredited investor–only ("AI-only") schemes and has extended certain relaxations to large value funds ("LVFs") for accredited investors under the SEBI (Alternative Investment Funds) Regulations, 2012.
Amendments to SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014 to expand investor classifications (Link) and (Link)
SEBI through notifications dated December 11, 2025, has notified amendments to the SEBI (Real Estate Investment Trusts) Regulations, 2014 and the SEBI (Infrastructure Investment Trusts) Regulations, 2014, introducing revisions to key investor classification definitions applicable to real estate investment trusts ("REITs") and infrastructure investment trusts ("InvITs"). The amendments are intended to align investor eligibility norms with the broader securities regulatory framework and expand institutional and strategic investor participation.
The amendments, inter alia, provide for: (i) substitution of the definition of "institutional investor" to include qualified institutional buyers and/or family trusts or SEBI-registered intermediaries having a net worth exceeding INR 500 (Indian Rupees five hundred) crore, based on the latest audited financial statements; (ii) substitution of the definition of "qualified institutional buyer" to align it with the corresponding definition under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018; and (iii) substitution of the definition of "strategic investor" to expressly specify eligible investor categories and prescribe minimum investment thresholds, subject to compliance with applicable regulatory requirements.
Draft Securities Markets Code, 2025 Introduced to Consolidate India's Securities Laws(1)
Government of India has introduced the draft Securities Markets Code, 2025 ("SMC") in the Lok Sabha, proposing a comprehensive consolidation and amendment of India's core securities legislations, namely the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, and the Depositories Act, 1996.
The draft SMC seeks to rationalise overlapping provisions and modernise the securities law framework by adopting a principle-based approach aimed at reducing compliance burden, improving regulatory governance, and supporting technology-driven capital markets. The proposal follows earlier announcements made in the Union Budget 2021 and aligns with recent legislative consolidation efforts across other legal domains.
The SMC, inter alia, provides for: (i) expansion of the SEBI's board strength and enhanced conflict-of-interest disclosures; (ii) statutory recognition of investor rights through an enabling framework for an Investor Charter; (iii) re-introduction of an independent ombudsperson for grievance redressal; (iv) introduction of limitation periods and timelines for investigations and inspections; (v) rationalisation of offences by decriminalising technical and procedural lapses; and (vi) codification of a regulatory sandbox framework for the securities markets.
The bill has been referred to the Parliamentary Standing Committee on Finance and remains at a preliminary stage of the legislative process.
Government outlines measures to strengthen oversight of the digital lending ecosystem
In a reply to a question in the Lok Sabha on December 08, 2025, the Union Minister of Finance, Nirmala Sitharaman, stated that the Government of India, in coordination with the Reserve Bank of India ("RBI"), has undertaken multiple measures to strengthen regulatory oversight of the digital lending ecosystem. The response outlined steps aimed at improving transparency, enhancing compliance, and strengthening consumer protection in the digital lending space.
The measures, inter alia, include the launch of a public directory of digital lending applications ("DLAs") deployed by RBI-regulated entities and the implementation of stricter compliance requirements under the RBI's (Digital Lending) Directions, 2025 (2) . The response further highlighted coordinated action with the Ministry of Electronics and Information Technology and the Indian Cyber Crime Coordination Centre to identify and block unauthorised DLAs and to enhance safeguards for consumers against illegal lending practices.
The statement reflects a coordinated, multi-agency approach to addressing risks in the digital lending market and reinforces the Government's focus on regulatory compliance, consumer protection, and systemic stability in the digital finance ecosystem.
The RBI Deputy Governor, T. Rabi Sankar, delivered a keynote address at the Mint Annual BFSI Conclave 2025 held on December 12, 2025, in Mumbai, setting out RBI's regulatory perspective on stablecoins and central bank digital currencies ("CBDCs").
The address articulated the central bank's position on the role of private digital currencies in the financial system and reiterated the policy rationale underpinning the RBI's approach to sovereign digital money.
In his address, inter alia, he stated that: (i) stablecoins do not serve any meaningful purpose within the financial system, as their purported functions can be performed more effectively by CBDCs; (ii) large-scale substitution of bank deposits with stablecoins could increase the cost of credit or compel banks to rely more heavily on central bank liquidity; and (iii) while stablecoins are often promoted as a tool for faster and cheaper cross-border payments, similar or superior efficiencies can be achieved through central bank–led solutions such as interoperable CBDC corridors and interlinking of fast payment systems, which preserve monetary sovereignty and financial stability without introducing the systemic risks associated with privately issued stablecoins.
NSDL directs depository participants to ensure compliance with KYC upload requirements
National Securities Depository Limited ("NSDL"), through a circular dated December 04, 2025 ("Circular"), has directed DPs to ensure strict compliance with SEBI circulars relating to the uploading of client know-your-customer ("KYC") records with KYC Registration Agencies ("KRAs"). The Circular has been issued in view of instances of non-adherence observed with respect to the prescribed KYC upload requirements.
The Circular, inter alia, advises that: (i) DPs must ensure that the KYC records of all non-closed clients are uploaded with the KRAs; (ii) only clients whose KRA status reflects 'KYC Registered' or 'KYC Validated' shall be permitted to transact in the securities market; and (iii) all pending KYC uploads are required to be uploaded by January 02, 2026.
SEBI prescribes enhanced governance norms for market infrastructure institutions
SEBI, through a circular dated December 12, 2025, has prescribed a set of measures to strengthen the governance framework applicable to market infrastructure institutions ("MIIs"). MIIs are the core entities that provide the essential platforms and mechanisms for the functioning of the securities market in India, which include the stock exchanges, clearing corporations and depositories. The circular seeks to enhance oversight, accountability, and clarity in management structures across critical operational and regulatory functions of MIIs.
The circular, inter alia, provides for: (i) revised provisions governing the appointment, roles, and reporting structures of executive directors overseeing key operational and regulatory verticals; (ii) mandatory representation of such executive directors on the governing board of MIIs; (iii) modifications to the reporting lines of key management personnel to reinforce independence and supervisory oversight; and (iv) assignment of additional responsibilities to the chief risk officer, including oversight of technology and cyber security audits.
The circular further specifies implementation timelines and prescribes a phased glide path for adoption of the revised governance framework. These measures are expected to strengthen institutional governance, enhance risk management practices, and align the functioning of MIIs with SEBI's evolving supervisory expectations.
SEBI Mandates NISM Certification for Compliance Officers of AIF Managers
SEBI, vide circular dated December 30, 2025, has mandated that Compliance Officers of managers of Alternative Investment Funds ("AIFs") obtain certification from the National Institute of Securities Markets by passing the NISM Series III-C: Securities Intermediaries Compliance (Fund) Certification Examination.
The circular, inter alia, provides that with effect from January 01, 2027, only persons holding the aforesaid certification shall be appointed as, or continue to act as, Compliance Officers of managers of AIFs.
Market Watch
Razorpay has received authorisation from the RBI to operate as a payment aggregator cross border ("PA-CB"), permitting it to facilitate both inward and outward cross-border payment transactions. With this approval, Razorpay is now authorised to facilitate online, offline, and cross- border transactions in accordance with the RBI's Master Directions on Regulation of payment Aggregator ("PA"), dated September 15, 2025.
SEBI announces launch of Past Risk and Return Verification Agency
SEBI has announced the launch of the Past Risk and Return Verification Agency ("PaRRVA"), an independent mechanism established to verify and authenticate historical performance and risk-adjusted return claims made by regulated entities. The initiative is aimed at strengthening the integrity of disclosures relating to past performance across the securities market.
SEBI has stated that PaRRVA will serve to curb misleading or unsubstantiated performance claims, standardise verification methodologies, and enhance transparency in the manner in which market intermediaries present historical risk and return data.
SEBI clarifies digital accessibility requirements under Investor Charter
SEBI has issued a clarification, dated December 08, 2025, in respect of its digital accessibility circulars, confirming that an investor's right to digital accessibility will form part of the Investor Charter and revising certain compliance requirements applicable to regulated entities. The clarification seeks to provide operational clarity while reinforcing SEBI's commitment to inclusive and accessible digital market infrastructure.
SEBI has clarified that regulated entities are no longer required to appoint an accessibility auditor by the earlier stipulated deadline. Instead, entities are required to: (i) submit a comprehensive status report on the accessibility readiness of all digital platforms by March 31, 2026; (ii) undertake periodic digital accessibility audits through certified professionals; and (iii) ensure that accessibility-related grievances raised on SEBI's SCORES platform are addressed prior to closure.
Groww receives SEBI approval to operate as an online bond distribution platform
Groww has secured approval from SEBI to operate as an online bond distribution platform, enabling it to digitally distribute bonds through its platform.
With this authorisation, Groww will be able to expand its services beyond equities and mutual funds, thereby broadening its offerings in debt and fixed-income instruments for retail and other eligible investors.
India and New Zealand conclude Free Trade Agreement to strengthen fintech collaboration
India and New Zealand have concluded negotiations on the financial services annex of their free trade agreement, aimed at enhancing strategic collaboration in the fintech and digital payments space.
Under the pact, Indian financial service suppliers will be permitted to establish cross-border digital operations in New Zealand, subject to local regulatory oversight, data sovereignty norms, and consumer privacy protections. The agreement also provides safeguards against discriminatory regulatory treatment for Indian financial institutions operating in the country.
As part of the framework, both countries will work towards developing an interoperable payments system to enable real-time cross-border remittances and merchant payments. This is expected to facilitate the entry of Indian digital payments platforms into the New Zealand market and strengthen bilateral fintech cooperation.
Paytm Payments Services Limited ("Paytm") has received regulatory approval from the RBI to operate as a payment aggregator for offline transactions as well as cross-border transactions, covering both inward and outward flows.
With this approval, Paytm now holds authorisations in place for facilitating online, offline, and cross-border transactions.
CredFlow secures RBI NBFC Licence to expand SME Credit Offerings
CredFlow has received a non-deposit taking Non-Banking Financial Company ("NBFC") licence from the RBI, enabling it to independently undertake lending activities. The company operates its NBFC arm through its group entity, Cashpositive Finance, under the brand name CashFloat.
With the licence, CredFlow will be able to move away from partner-led disbursals and gain end-to-end control over the credit lifecycle, including faster approvals, customised credit products, programme-based underwriting, and collections.
Major Deals
We have set out in the table below some of the major deals for the month of December 2025:
| Entity | Deal Value and Investors |
| Knight FinTech, a provider of technology infrastructure to banks, NBFCs and fintechs for digital lending, co-lending, and treasury management solutions | Raised USD 23.6 (twenty-three point six) million (~ INR 196 (one hundred and ninety-six) crore) from Accel, along with participation from IIFL, Rocket Capital, Prime Ventures, 3one4 Capital, Commerce VC, and Trifecta Capital. iv |
| Fibe, a digital lending startup | Raised USD 35 (thirty-five) million (~ INR 314 (three hundred and fourteen) crore) from International Finance Corporation .v |
| StockGro, an investment advisory platform | Raised USD 13 (thirteen) million (~ INR 117.3 (one hundred and seventeen point three) crore) from existing investor BITKRAFT Ventures. vi |
| Skydo, a cross-border payments startup | Raised USD 10 (ten) million (~ INR 89.8 (eighty-nine point eight) crore) in a round led by Susquehanna Asia Venture Capital, with participation from existing investor Elevation Capital. vii |
Footnotes
1. An article published by CMS IndusLaw analysing the draft Securities Markets Code, 2025 is available here.
2. Please note that as per the RBI's consolidation exercise on November 28, 2025 (available here), the Reserve Bank of India (Digital Lending) Directions, 2025 have been withdrawn and replaced by relevant master directions for each regulated entity.
i. https://nsearchives.nseindia.com/content/circulars/INSP68566.pdf
ii. https://nsearchives.nseindia.com/content/circulars/INSP71922.pdf
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