Introduction
India’s Digital Personal Data Protection Act, 2023 (DPDPA) marks a significant milestone in the country’s journey toward a comprehensive data protection regime. Enacted to safeguard individuals’ digital personal data and promote responsible data handling practices, the Act applies to both public and private entities that process personal data within India—and, in some cases, even outside its borders if such processing relates to offering goods or services to individuals in India.
One of the key regulatory innovations introduced under the DPDPA is the concept of a Significant Data Fiduciary (SDF). While all Data Fiduciaries are subject to core obligations under the Act, those designated as SDFs must meet enhanced compliance requirements, reflecting the higher risk their data processing activities may pose to individuals and national interests.
Under Section 10 of the Act, the Central Government is empowered to classify a Data Fiduciary or a class of them as an SDF, based on a nuanced risk assessment. This includes evaluating factors such as the volume and sensitivity of personal data processed, the risk of harm to data principals, the impact on India’s sovereignty and integrity, electoral democracy, the use of emerging technologies, and any other factor the government may prescribe. This framework allows for a flexible and contextual approach, enabling the government to proactively identify entities that warrant closer oversight due to the nature and scale of their data processing activities.
In this article, we explore what it means to be designated as a Significant Data Fiduciary, the implications of such a status, and how organizations can prepare for the heightened responsibilities that come with it.
Being designated as a Significant Data Fiduciary (SDF) under the DPDPA carries substantial legal, operational, and reputational implications. Legally, SDFs are subject to enhanced compliance obligations that go beyond the baseline requirements applicable to regular Data Fiduciaries. Operationally, this status requires organizations to invest in more sophisticated data governance frameworks, upgrade their cybersecurity infrastructure, and ensure real-time responsiveness to data principal requests and breach incidents. The designation also places the organization under closer regulatory scrutiny, increasing the likelihood of audits or enforcement actions in case of non-compliance. Reputationally, while the SDF label may indicate a significant market presence or technological capability, any failure to meet the elevated standards can lead to public trust deficits, potential financial penalties, and long-term brand damage. Thus, the implications are far-reaching and demand a high level of preparedness and accountability.
Compliance Obligations of Significant Data Fiduciaries
1. Appoint a Data Protection Officer (DPO)
Requirement:
- Must be based in India.
- Acts as the key contact point for the Data Protection Board and data principals.
- Should have expertise in privacy law, data governance, and risk management.
Compliance Actions:
- Identify qualified candidates with legal or cybersecurity backgrounds.
- Clearly define the DPO’s role, reporting directly to the board or CEO.
- Establish protocols for internal escalation and grievance redressal.
2. Conduct Regular Data Protection Impact Assessments (DPIAs)
Requirement:
- DPIAs must be conducted before initiating any processing that may pose a significant risk of harm to data principals.
Compliance Actions:
- Create a DPIA framework, similar to those used under GDPR.
- Include risk analysis, mitigation strategies, and consultation with DPO.
- Conduct DPIAs for: New AI/ML models Biometric data processing Cross-border data transfers
3. Appoint an Independent Data Auditor
Requirement:
- Must evaluate compliance with DPDPA and assess processing systems and policies.
Compliance Actions:
- Hire an independent firm or certified privacy professional.
- Schedule annual audits and maintain records of findings and remediation steps.
- Document audit trails for internal and external review.
4. Maintain a Comprehensive Record of Processing Activities (ROPA)
Requirement:
- Mandatory for transparency and regulatory audit purposes.
Compliance Actions:
- Maintain updated logs including: Types of personal data processed Purpose and legal basis Data sharing details (with whom and why) Storage locations and retention schedules
- Tools like OneTrust, TrustArc, or custom-built platforms can help automate this.
5. Enhanced Consent and Notice Mechanism
Requirement:
- Provide clear, accessible, and granular privacy notices.
- Obtain verifiable, informed consent for all data processing.
Compliance Actions:
- Redesign privacy policies in plain language and local languages (if needed).
- Use layered notices for apps and websites.
- Implement opt-in/opt-out toggles for different types of data uses.
- Maintain consent logs with timestamps.
6. Grievance Redressal System
Requirement:
- Timely resolution of data principal grievances.
- Channel for users to contact the DPO.
Compliance Actions:
- Set up a privacy helpdesk or online portal.
- Log complaints and assign SLA (e.g., 7–10 days for resolution).
- Escalate unresolved issues to the DPO before Board intervention.
7. Data Security Measures and Access Controls
Requirement:
- Ensure reasonable security safeguards against unauthorized access or breaches.
Compliance Actions:
- Conduct regular penetration testing and vulnerability assessments.
- Encrypt data at rest and in transit.
- Apply role-based access control (RBAC) and multi-factor authentication (MFA).
- Maintain a Security Incident Response Plan (SIRP).
8. Data Breach Notification Protocol
Requirement:
- Notify the Data Protection Board and affected data principals in case of a breach that may cause harm.
Compliance Actions:
- Establish a 72-hour incident reporting protocol (best practice).
- Maintain incident logs and impact assessments.
- Create communication templates for breach disclosures.
9. Training and Awareness
Requirement:
- Regular internal training on data protection practices for all employees.
Compliance Actions:
- Quarterly privacy workshops or e-learning modules.
- Role-specific training for high-risk functions like marketing or IT.
- Maintain attendance records and assessment scores.
10. Vendor and Processor Management
Requirement:
- Ensure third-party processors are compliant with DPDPA.
Compliance Actions:
- Review and update Data Processing Agreements (DPAs).
- Conduct vendor risk assessments.
- Ensure processors follow same levels of security and consent as the SDF.
A Balanced Innovation-Protection Approach?
The introduction of the SDF concept reflects a nuanced and modern regulatory approach, focusing enforcement and compliance burdens on those entities most capable of causing large-scale harm. In theory, this should ensure efficient use of regulatory resources, reduce compliance burdens for smaller players, and still protect citizens’ privacy.
However, the lack of objective thresholds or publicly known criteria for designation could create confusion. For example, it is unclear whether all social media giants, e-commerce platforms, or fintech companies will automatically be considered SDFs or whether designation will be selective. More transparency in the designation process and publication of a list of currently notified SDFs would help reduce uncertainty.
Moreover, effective implementation will depend heavily on the capacity and independence of the Data Protection Board of India, and the willingness of the government to enforce obligations fairly, even against politically influential or state-owned entities.
Conclusion
The concept of a Significant Data Fiduciary is central to ensuring that data protection laws are risk-based, proportionate, and dynamic. While the DPDPA’s approach is broadly aligned with global best practices, its effectiveness will depend on:
- Clear, predictable, and objective designation mechanisms
- Strong oversight by the Data Protection Board
- Capacity-building support for designated entities
- Avoidance of overreach or arbitrary enforcement
If executed well, the SDF framework can foster responsible innovation, protect user rights, and build trust in India’s digital economy.
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We serve as a comprehensive resource on the Digital Personal Data Protection Act, 2023 (DPDP Act), India's landmark legislation on digital personal data protection. It provides access to the full text of the Act, the Draft DPDP Rules 2025, and detailed breakdowns of each chapter, covering topics such as data fiduciary obligations, rights of data principals, and the establishment of the Data Protection Board of India. For more details, kindly visit DPDP Act 2023 – Digital Personal Data Protection Act 2023 & Draft DPDP Rules 2025
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