Top Regulatory Compliance Challenges

Top regulatory compliance challenges facing India Inc in 2025

India Inc. navigated tough 2024 regulations, adapting compliance for 2025's emerging landscape.


In brief

  • Regulators are likely to increasingly leverage technology for efficient oversight and reporting
  • AI and ML-based tools will continue to evolve to better address compliance needs 
  • There may be more emphasis on bringing Indian regulations at par with international standards

In the year 2024, Indian businesses found themselves navigating a regulatory landscape rife with compliance challenges that went on to reshape operations and set the tone for the future. From Data Privacy laws to ESG reporting standards, AI adoption challenges and managing corruption—organizations had to brace themselves to tackle unprecedented regulatory scrutiny. As we begin a new year, it is time to take stock of the regulatory compliance challenges that companies faced in the year past, assess its impact and the learnings gleaned in ensuring implementation of compliance risk mitigation strategies, along with sneaking a peek at the prevailing trends that will continue to redefine the compliance turf in 2025. Here are some of the new regulations and stricter enforcement mandates that has companies scurrying to strengthen their compliance functions:

Data Protection and Privacy

The Digital Personal Data Protection Bill, which is set to revolutionize the way personal data is handled in India, has been a topic of much discussion and preparation among businesses. However, without a finalized set of rules, companies have been in a preparatory limbo, aware that significant changes are on the horizon but uncertain about the specifics of compliance requirements. 

Artificial Intelligence (AI) Regulations

The rapid adoption of Artificial Intelligence (AI) across sectors has necessitated a careful approach to regulation, balancing safety and innovation. Several countries are currently in the process of navigating the complexities of formulating regulations for AI technology, aiming to promote its safe adoption and responsible use. The European Union stands out with its AI Act, which is the most detailed legislation dedicated to AI as of now. Conversely, the United States and the United Kingdom have relied upon their respective common law systems to address risks as they emerge. India has formulated an Advisory Group specific regulatory AI framework and is also working towards establishing a National AI Safety Institute.  

Environmental, Social, and Governance (ESG) Compliance

ESG compliance in India has taken centre stage as investors, consumers and regulators are increasingly focusing on establishing sustainable and ethical business practices. Indian companies are being closely looked at to disclose their environmental impact, social contributions and governance practices in a transparent manner. The Securities and Exchange Board of India (SEBI) has mandated certain classes of companies to disclose their ESG performance, which demands increased attention towards implementing compliance mechanisms and the integration of sustainability into core business strategies.

Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF)

The Financial Action Task Force (FATF) has kept organizations on their toes with evolving guidelines on AML and CTF compliance. The Reserve Bank of India (RBI) and the Enforcement Directorate (ED) have tightened regulations, requiring businesses to enhance their due diligence processes and report suspicious transactions. The increased scrutiny has led to a greater need for compliance professionals and advanced analytics tools to monitor financial transactions.

Corporate Governance and Fraud Prevention

The marked proliferation in incidences of corporate fraud has reiterated the need for establishing good governance practices. The Ministry of Corporate Affairs (MCA) has introduced new rules to improve transparency and accountability. Businesses have had to adopt stricter internal controls, enhance board oversight, and implement comprehensive risk management frameworks. These measures have increased the compliance burden but are essential for building investor confidence and fraud management.

The cumulative impact of these compliance challenges has been substantial. Businesses are now incurring higher costs for compliance management, technology upgrades and hiring specialized regulatory personnel. These investments, however, are not without their benefits. Improved compliance has led to enhanced reputation, better risk management plan and the potential for increased investment.

To further address compliance challenges, businesses would need to take the following steps:

  • Conduct regular compliance audits and risk assessments
  • Invest in compliance training for employees
  • Implement robust data governance and data security frameworks
  • Stay informed about regulatory changes and updates
  • Engage with subject matter, legal and compliance experts regularly for guidance
  • Utilize technology solutions for compliance management and monitoring

Looking ahead to 2025, several new trends are expected to evolve leading to further changes in the regulatory landscape. Digital transformation will continue to be a key theme, with regulators likely to leverage technology for more efficient oversight and reporting. Organizations would be looking at increasing their tech budgets to meet compliance requirements by automating tactical tasks. Moreover, Artificial Intelligence and Machine Learning-based tools will continue to evolve to better address compliance needs by helping businesses proactively identify risks and streamline compliance processes, ultimately reducing the burden and enhancing effectiveness.

There may be a greater push towards bringing Indian regulations at par with international standards—particularly in areas like data protection—to facilitate easier global trade and data flows through consistent guidelines.

While 2024 has been a challenging year for regulatory compliance in India, it has also been a year of learning and adaptation. Businesses that continue to prioritize compliance and harness the might of technology to ensure meeting reporting standards, will be well-positioned for success in the coming years. 

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    Summary

    In 2024, Indian businesses tackled an evolving regulatory environment. The heightened scrutiny reshaped corporate operations and compliance functions. As 2025 approaches, companies are assessing the lessons learned from 2024’s regulatory challenges, preparing for stricter enforcement, and adapting to new trends that will continue to redefine compliance.

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