India's dedication to the digital revolution has been evidenced by the rapid adoption of digital technologies in recent years. 1.5 billion Indians now have a unique digital identity thanks to Aadhaar, which allows them to access a wide range of government services and subsidies easily. In September 2023, The Unified Payments Interface (UPI) continued to clock 10 billion+ transactions, valuing over INR 15.8 trillion. Initiatives like the National Digital Health Mission (NDHM) have helped integrate digital technology into the healthcare industry. Patients can now easily access their medical information, schedule appointments online, and benefit from telemedicine. Even during the COVID-19 pandemic, AarogyaSetu and CoWIN showcased the country’s ability to implement digital solutions on a large scale quickly. AarogyaSetu allowed for real-time contact tracing of COVID-19 infections, while CoWIN provided online vaccine appointments and the generation of verifiable digital certificates. The creation of critical Digital Public Infrastructure (DPI) has enabled the proliferation of digital technologies promoting the inclusion, availability, and accessibility of financial, healthcare, and educational services.
Another area that has benefitted from the promulgation of digital technologies is the business regulatory ecosystem. It comprises 1,536 acts and rules containing 69,233 compliance obligations, leading enterprises across India to deal with 6,618 annual filings. Factoring in the high number of daily regulatory updates, we find that the compliance ecosystem is as fluid as it is complex. A total of 5,986 regulatory updates were recorded in FY22, which translates to over 16 updates per day. Managing compliances, filings, and tracking pending obligations is difficult enough for a compliance officer, let alone keeping track of these many notifications, circulars, amendments, directions, and notices. Failure to comply with applicable regulations further adds the burden of penalties, legal repercussions, and severe harm to the reputation of the organisation.
The high cost of non-compliance has made business owners wary of getting on the wrong side of the law, whether accidentally or otherwise. In addition, boards of directors and chief executive officers are becoming more vigilant and demanding in how they approach regulatory compliance. Because of the severe consequences of failing to comply with regulations, businesses are actively looking for solutions that will give them improved visibility and control over their compliance functions. They are quickly moving away from processes that are ad hoc, manual, anecdotal, and driven by people in favour of compliance management that is more seamless, digital, traceable, and event-based.
The government and sectoral regulators are also actively looking into promoting end-to-end digitisation of compliance processes by way of straight-through filings/ API-based filings. The Goods and Services Tax Network has allowed private corporations to act as intermediaries, such as e-Invoice Registration Portals (IRPs), to add capacity for the registration of e-Invoices. Similarly, the Income Tax Department has enlisted the aid of e-return Intermediaries (ERIs) to make it easier for the taxpayer to prepare and submit returns.
Concurrently, digital compliance management solutions that use the web, mobile, cloud, and analytics have surfaced. India's businesses are adopting these solutions to maintain compliance with the law. These solutions provide end-to-end automation, including tracking and management, data processing, preparation of statutory filings, digital record maintenance, and automatic identification of potential compliance issues. By capitalising on the capabilities of the two layers (tracking & management and automation) of compliance automation, they furnish employers with intelligent, productive, and efficient means of answering their compliance management needs. The tracking layer is comprised of an extensive compliance information database, which exceeds 69,000 entries. Businesses can locate all pertinent compliance information, pending filings with due dates, and the penalties for failing to comply with each obligation once onboarded. These technologies facilitate the digitisation of business data and process workflow. They can automatically detect delays and defaults. Furthermore, regulatory updates are incorporated into these solutions, ensuring accurate and timely compliance.
Furthermore, they come laden with features such as customisable checklists, real-time regulatory updates, automated alerts and reminders, and periodic analytics. This aids in creating an environment of transparency, accountability, timeliness and traceability around regulatory obligations. It enables KMPs to create a culture of compliance and guardrails around compliance processes. Corporations also need to manage key business processes that generate compliance documentation. The automation layer comes into play here and creates a centralised repository of compliance documents stored in a verifiable, transparent, and tamper-proof manner. It provides capabilities for centralised document uploading and document production, approval, and preservation per the applicable standards, formats and regulations.
Consequently, traditional, ad-hoc and manual processes are being rapidly phased out in favour of digital compliance software. Certain regulators have introduced straight-through filings that take advantage of API integration. These API-based filings allow users to file their returns and challans directly from their digital platform. This is observable in action for GST, Income Tax and SEBI filings. As more and more businesses and regulators adapt API-based filings, we will have a filing layer.
Embracing technology allows employers to avoid poor and non-compliance due to lapses, delays, or defaults. Compliance management that is intelligent and automated can allow businesses to remain alert, aware, and updated constantly. The RegTech revolution will prove to be a critical step in India’s commitment to reducing the compliance burden of businesses and improving the ease of doing business. The regulatory landscape will be transformed by integrating RegTechs in digital public infrastructure (DPI), implementing Unique Enterprise Number (UEN), Enterprise DigiLocker, and API-enabled straight-through filings. It will prove to be a pivotal step in removing the persisting regulatory cholesterol and reducing the complexities that have come to be associated with compliance.