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Under DPDPA, the cost of holding extra data is finally on the books
Imagine signing up for a financial service and being asked for far more information than the use case seems to need. At what point does convenience start to feel like intrusion?
For BFSI institutions, the question is no longer how much data can be collected, but how much is actually needed. In an environment defined by rising regulatory scrutiny, escalating cyber threats, and sharper customer expectations on privacy, data minimisation is shifting from a compliance obligation to a strategic imperative. It is driving stronger security, sharper decision-making, and more efficient operations.
The Seven Principles That Now Govern Personal Data.
The Digital Personal Data Protection Act (DPDPA) mandates data minimisation and requires Data Fiduciaries to collect and process only the minimum personal data necessary for a specific, lawful purpose. Relevance, limited retention, and the avoidance of excessive collection are now legal obligations, not best practices. The Act sits on a wider set of principles that together define how personal data must be handled.
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What BFSI Organisations Should Be Doing Now
Translating the principles into practice means working across six areas at once. None of them is new in isolation. The shift is in treating them as a connected operating discipline rather than scattered projects.
Purpose-driven data collection
Align financial data collection with specific regulatory and business objectives. Stop accumulating excessive PII and transactional fields that no one has a defined use for.
Retention policies and automated deletion
Define retention timelines for every data category and automate deletion so data is not held beyond its intended purpose.
Anonymisation and pseudonymisation
Use encryption, tokenisation, and anonymisation to keep sensitive data usable for analytics and risk modelling while reducing identifiable exposure.
Access control and role-based permissions
Restrict data access by role, layer multi-factor authentication on top, and treat unnecessary access as unnecessary risk.
Regular data audits and cleanup
Run periodic audits to identify and eliminate redundant, obsolete, or trivial data across systems and customer records.
Third-party risk management
Evaluate fintech and vendor data governance practices to ensure end-to-end compliance. Under DPDPA, the fiduciary owns the breach, not the partner.
Data Minimisation Drives Credit Outcomes
As credit bureaus consistently highlight, it is not the volume of data but the relevance and accuracy of data that strengthens risk assessment and sharpens underwriting, which ultimately lowers delinquencies.
Where the Real Friction Lies
The benefits are clear, but institutions must balance minimisation against risk management, operational needs, and regulatory obligations. Legacy core banking systems often retain large volumes of historical data without well-defined retention frameworks, which makes minimisation difficult to implement in practice. Determining what counts as “necessary” data remains context-specific, particularly for underwriting, fraud detection, and regulatory reporting.
Dependencies on third-party ecosystems, including fintech partners, cloud providers, and payment processors, extend data exposure beyond the institution’s perimeter. That requires consistent governance and compliance across every stakeholder in the chain. Effective data minimisation is therefore not just a technical exercise, it is a broader organisational shift that requires cross-functional alignment across systems, processes, and partners.
From Data Volume to Data Value
The transition is visible across five dimensions of how a financial institution operates. Each one moves from a volume-led logic to a value-led one.
The Rise of Precision-Driven Decisioning
The future of data strategy will not be defined by the scale of information collected, but by the precision with which it is managed. The challenges are real, but the long-term benefits of data minimisation are clear. It will let institutions operate more securely and efficiently, and give customers greater confidence in how their data is handled.
Building a DPDPA-Ready Data Estate?
The Digital Fifth works with banks, NBFCs, insurers, and fintechs on data governance design, retention architecture, vendor risk frameworks, and DPDPA-aligned operating models. If your data estate is not where it needs to be by the time enforcement bites, we can help you get there.
