GST cut, data protection, fraud prevention, and more: Why 2025 was a regulatory milestone for financial services

If there was one theme that defined financial services in 2025, it was purpose-led regulation. Beyond product expansion and innovation, the regulatory ambit expanded much wider to focus on consumer protection, fraud prevention and stronger oversight. Right from a zero-GST on individual life and health insurance and new surrender value norms, to AI and fraud guardrails, to pension-linked liquidity and tighter digital lending and stronger payment frameworks, the industry went all out to reinforce trust at scale. 

In entirety, every reform in these respective industries brought India closer to a stronger, affordable and secure financial services ecosystem. In 2025, depth and discipline mattered as much as access and adoption. Here’s looking at key milestones that made a year of customer-centricity backed by regulation. 

Bringing affordability and innovation to India’s middle class 

Insurance reforms in 2025 took a decisive turn towards affordability and transparency, without compromising on innovation or expansion. The decision to bring GST on insurance down to zero on individual life and health insurance is a clear recognition that something as essential as protection should not be priced out of reach. By directly lowering premium costs, this remarkable move improves affordability and supports wider adoption, particularly among first-time buyers and middle-income households. 

At the same time, the shift to 100% FDI in insurance opens the door for global capital. For an industry that depends on patient capital and robust governance, this reform strengthens the sector’s ability to invest in distribution, claims infrastructure and product innovation over the long haul. 

Equally important are the new surrender value norms, which tilt the balance decisively in favour of the policyholder. By ensuring fairer payouts and greater transparency, these norms reinforce confidence in long-term savings and protection products. Together, these measures signal an insurance market that is not just expanding, but becoming more credible and consumer-aligned. 

Enabling responsible innovation and AI governance 

As financial services become increasingly data-driven, clarity on data rights has become essential. The Digital Personal Data Protection (DPDP) Rules, notified in November 2025, officially operationalised India’s privacy framework under the Digital Personal Data Protection Act, 2023. Rather than a “big bang” implementation, the rules introduce a phased rollout, allowing organisations time to prepare before full compliance obligations take effect. 

Some foundational provisions, including establishment of the Data Protection Board and basic governance structures, are effective immediately, while core operational obligations, such as consent requirements, breach reporting, notice obligations and data principal rights, will eventually follow. This phased approach gives insurers, lenders and fintechs runway to re-engineer their systems without disrupting innovation. 

Not just this, 2025 also marks the official arrival of a dedicated framework for AI governance. In November, MeitY unveiled the India AI Governance Guidelines under the India AI Mission, which favours a light-touch, risk-based approach rather than a rigid one. 

Retirement planning and pensions evolve with life-stage needs 

One of the most consequential reforms of 2025 came in the area of pension liquidity. Through amendments to the National Pension System’s exit and withdrawal regulations, the PFRDA reduced the mandatory annuity purchase requirement for non-government subscribers from 40% to 20%, allowing retirees to withdraw up to 80% of their accumulated corpus as a lump sum at exit. This change introduces significantly greater flexibility at retirement, particularly for households that may need capital for healthcare, housing or debt repayment. 

Alongside this, the revised framework also permits subscribers to seek limited financial assistance from regulated financial institutions against their NPS corpus by marking a lien or charge on the account, subject to defined caps and conditions. Importantly, both measures are designed with safeguards in place, ensuring that short-term liquidity needs can be addressed without undermining long-term retirement security. Together, these changes reflect a more nuanced understanding of household finance, recognising that retirement planning must balance stability with measured flexibility across life stages. 

Beyond this, 2025 also marked a structural shift in how pensions are designed. Under the newly introduced Multiple Scheme Framework, pension funds are now allowed to launch schemes with equity exposure of up to 100% with a 15-year vesting period. This represents a significant shift from the earlier schemes, where equity exposure was capped at 75%, and the corpus remained locked in until the subscriber turned 60. While these schemes still continue to operate alongside the new ones, now the subscribers have a wider set of options. For younger and mid-career investors in particular, this makes retirement planning more aligned with long-term wealth creation. 

The PFRDA’s reforms in 2025 also reflect a broader intent to move pensions away from a one-size-fits-all product and towards a more flexible and investor-oriented framework. 

Credit growth with stronger foundations 

On the lending side, 2025 has been about building healthier credit markets. Tighter digital lending norms now place responsibility squarely on regulated entities, with clear rules around disclosures, data usage and borrower protection. Explicit consent, transparent pricing and structured grievance mechanisms are foundational to the digital lending framework. These measures strengthen the credibility of digital credit while protecting borrowers from opaque practices. For lenders, they reduce long-term risk and restore confidence. 

As the RBI trimmed repo rates across 2025, lending rates went down, too, especially the borrowing costs for home loans. This ensures improved affordability for consumers and sparks growth for the credit ecosystem as well. 

Stronger payments infrastructure 

India’s payments ecosystem reached a pinnacle of global recognition in 2025, led by the National Payments Corporation of India. UPI surpassed a staggering 200 billion annual transactions, accounting for over 83% of retail payment volumes. NPCI’s strategic push took UPI to new international corridors and cemented it as a global benchmark for real-time payments. Digital payments accounted for virtually all non-cash retail transactions, reflecting the deep penetration and adoption of digital rails across the economy. 2025 was all about making the system more resilient. Under NPCI’s stewardship, the focus in 2025 shifted to high-value digital transactions and advanced fraud control. 

Recognising payments as critical infrastructure, the governance of payment systems was strengthened through clearer oversight and enhanced risk management. The expansion of credit-on-UPI and more formalised dispute resolution frameworks points to a system evolving beyond simple transactions. Emphasis on uptime, operational resilience and consumer protection reflects the maturity of a platform that now supports both everyday commerce and credit delivery at a population scale. 

Cyber resilience becomes core to financial stability 

As India’s financial system digitises at the population scale, cyber risk has emerged as a systemic concern rather than a technology issue. The numbers underline the urgency. Government data shows that reported cyber incidents handled by CERT-In have crossed over a million annually in recent years, reflecting both rising threat activity and deeper digital penetration. For a financial ecosystem that processes billions of transactions every month, even brief disruptions carry outsized consequences. 

In response, 2025 saw cyber resilience being embedded firmly into regulatory supervision. Banks, insurers and payment system operators are now required to demonstrate robust cyber controls, tested disaster recovery mechanisms and continuous monitoring capabilities. Regulators have also made it clear that cyber preparedness is a board-level responsibility, not just an operational one. Measures such as tighter incident reporting norms, sector-wide cyber resilience frameworks and even structural interventions like exclusive internet domains for regulated entities reflect this shift. Trust in digital finance rests as much on resilience and uptime as it does on innovation and convenience in this day and age. 

These reforms make 2025 a defining year for India’s financial services framework. It is a year that reinforced the system’s foundations while preserving its momentum. The regulatory framework no longer holds back innovation but enables growth with clarity and consumer-centricity. As India looks to the next decade, the future of financial services will be shaped by these reforms that combine innovation with trust, scale with responsibility, and ambition with resilience. 

(The author is joint group CEO, PB Fintech. Views are personal.)