Are you a Data Fiduciary under the DPDP Act?

The Digital Personal Data Protection (DPDP) Act, 2023 has fundamentally changed how organizations must manage and protect personal data in India. Yet, the most underestimated challenge companies face is not cybersecurity, automation, infrastructure, or governance alignment—it’s answering one deceptively simple question:

Are you a Data Fiduciary?

This classification determines your legal responsibility, your exposure to regulatory action, and your risk of facing penalties that may go up to ₹250 crore. The number of companies misclassifying themselves as “processors” is alarmingly high, and auditors are flagging this as one of the biggest DPDP compliance failures.

The truth is simple: If your organization decides why and how personal data is processed, you are a Data Fiduciary—regardless of size, industry, or digital maturity.

This article breaks down the concept in an auditorial, practical, and compliance-focused tone to help CISOs, governance leaders, and senior management determine their DPDP applicability accurately.

What Exactly Is a Data Fiduciary in India?

Under the DPDP Act 2023, a Data Fiduciary is any organization that determines the purpose and means of processing personal data.

In practical terms, you are a Data Fiduciary if your organization decides:

• Why personal data should be collected
• Which categories of personal data will be collected
• How the data will be used, stored, or transferred
• Which systems and vendors will process the data
• What security and governance controls must apply

This definition is intentionally broad. The policy intent, as explained in the MeitY DPDP overview, is to ensure that accountability sits with the entity exercising actual control over data—not the entity performing backend operations.

Even if your company outsources its HRMS, CRM, cloud hosting, analytics, security operations, or customer onboarding, you remain the Data Fiduciary. The decision-making authority—not the data infrastructure—defines the fiduciary role.

Data Fiduciary vs Data Processor — The Most Misunderstood Difference

This distinction is the root cause of 60%+ compliance misinterpretations identified during DPDP gap assessments.

A Data Fiduciary:

• Decides why data is collected
• Decides what data is collected
• Chooses lawful basis (Consent or Legitimate Use)
• Selects vendors, tools, and processors
• Bears primary legal accountability

A Data Processor:

• Follows instructions from the Data Fiduciary
• Does not decide the purpose of data collection
• Does not determine how data is used
• Performs only operational tasks
• Bears limited liability

If your org decides how customer, employee, vendor, or website data flows—you are the Data Fiduciary, even if all processing is outsourced to cloud or IT service providers.

For a deeper understanding of real-world breaches caused by mismanaged vendors, refer to CyberTechJournals’ analysis of the Oracle Legacy Cloud breach.

Why Being a Data Fiduciary Matters More Than You Think

Being classified as a Data Fiduciary under the DPDP Act brings several high-stakes obligations.

1. Heavy Penalties for Non-Compliance

Violations under DPDP can result in penalties of up to ₹250 crore per incident.
See MeitY DPDP Rules.

2. Regulatory Scrutiny

The Data Protection Board (DPB) can:

• Seek mandatory audits
• Issue binding compliance orders
• Call for breach reports
• Enforce corrective measures

3. Full Accountability for Vendor Actions

If your cloud provider, CRM tool, or outsourced SOC mishandles data—you still remain responsible as the Data Fiduciary.

Cases like Fortinet Zero-Day CVE-2024-55591 show how even trusted security appliances can expose user data.

4. Business and Operational Impact

Fiduciary obligations influence:

• Consent workflows
• Privacy notices
• Data lifecycle rules
• Employee onboarding
• Security architecture
• Incident response

DPDP is not simply a legal requirement—it directly shapes operational design and governance frameworks.

Are You a Data Fiduciary? — The Auditor’s Quick Assessment

Auditors, CISOs, and compliance officers commonly use the following assessment to determine DPDP applicability:

1. Do you collect or store personal data?

Includes employee data, customer data, vendor data, web analytics, or app registrations.
If yes → continue.

2. Do you decide why that personal data is collected?

If you design forms, onboarding flows, or service requirements → strong indicator.

3. Do you decide how the data is processed?

Selecting CRMs, HRMS, cloud providers, or analytics platforms equals decision-making control.

4. Do you outsource processing but retain control?

Outsourcing does not remove fiduciary responsibility.

5. Do you process or serve individuals located in India?

DPDP applies even if the controller is outside India.

If most answers are “yes,” your organization is almost certainly a Data Fiduciary.

Significant Data Fiduciary (SDF) — The Higher-Risk Category

Some organizations may be designated as Significant Data Fiduciaries based on risk.

Criteria for SDF Classification:

• Large-scale personal data processing
• Use of sensitive data (financial, biometrics)
• High risk to individuals (profiling, tracking, AI modeling)
• Impact on sovereignty, national security, or public order

Additional SDF Obligations:

• DPO appointment (must be India-based)
• Mandatory Data Protection Impact Assessments (DPIAs)
• Independent annual data audits
• Enhanced governance controls

For comparison, refer to GDPR-based classification used by OECD.

DPDP Applicability: Does the Law Apply to You?

Many companies assume DPDP applies only to big tech or digital-first enterprises. That assumption is wrong.

DPDP applies if you:

• Operate digitally (even partially)
• Offer goods/services to individuals in India
• Handle personal data inside or outside India
• Digitize offline documents (scanned KYC, HR files, customer forms)

Offline organizations are not exempt.
A handwritten form scanned into a laptop makes you a digital data processing entity under DPDP.

For more guidance, see CyberTechJournals’ breakdown on Data Loss Prevention for 2025, which details how digitized data creates new risks.

The Cost of Misclassification — What Companies Learn Too Late

Misclassifying your role can lead to:

• Regulatory investigations
• Mandatory audits
• Forced system changes
• Contractual breaches
• Loss of trust
• Financial penalties

Ignorance of law is not a defense under DPDP.
This is similar to breach reporting requirements enforced by CERT-In.

Your Responsibilities as a Data Fiduciary

Once identified, the organization must adopt the following responsibilities:

1. Transparent Notices & Consent

Define and display clear notices explaining:

• What data is collected
• Why it is collected
• How it will be used
• How long it will be retained

Consent must be:

• Informed
• Unbundled
• Revocable

2. Reasonable Security Safeguards

This includes:

• Encryption
• Access control
• Security monitoring
• Identity governance
• Patch management
• Backup policies

ISO/IEC 27001 provides useful guidance.

3. Breach Notification

DPB and affected users must be informed of:

• Breach nature
• Impact
• Remedial actions

4. Rights Management

Users can request:

• Access
• Correction
• Deletion
• Consent withdrawal

These must be processed within defined timeframes.

5. Vendor Compliance

Vendor risk becomes your fiduciary risk.
For more on vendor-related threats, review CyberTechJournals’ Social Engineering Analysis.

6. Governance & Audits

All fiduciaries must maintain:

• Data governance frameworks
• Security policies
• Audit trails
• DPIAs (for SDFs)

Why This Matters — Insights from Cyber Tech Journals

CyberTechJournals regularly analyzes high-impact cyber incidents, and a recurring theme is fiduciary accountability failure.

Key examples:

• Oracle Legacy Cloud Breach
• Fortinet Zero-Day Vulnerability (CVE-2024-55591)
• Social Engineering & Human Risk
• Data Loss Prevention Strategies (2025)

These cases show why DPDP compliance must integrate cybersecurity governance—not sit in isolation.

Bottom Line: Identify Early, Prepare Early

Correctly identifying whether your organization is a Data Fiduciary is not just a regulatory requirement; it is a risk mitigation necessity.

If you determine why and how personal data is processed, you are a Data Fiduciary.
And if you are one, DPDP compliance is not optional—it is your legal obligation.

Early classification allows:

• Better governance
• Stronger controls
• Clearer vendor management
• Reduced regulatory exposure

The companies that classify early will lead with trust. The companies that delay will face the consequences.