Disaster Recovery as a
Service for NBFCs in India:
Strengthening Operational
Continuity and Compliance

NBFCs expanded credit by about 22% year-on-year, with total assets crossing ₹42 lakh crore, last year!

That’s no small number. These Non-Banking Financial Companies have quietly become a strong pillar in India’s financial ecosystem. NBFCs are the lenders that step in when traditional banks hesitate, helping first-time borrowers, small shop owners, families build their first homes, and rural communities fueling local economies.

Technology has been both an enabler and a double-edged sword in this journey. Digital loan apps, AI-based credit assessments, and cloud-hosted repayment platforms have made scale possible in a way that wasn’t imaginable a decade ago. But the same reliance on digital systems means a power outage, a network crash, or a cyber breach can freeze collections and disrupt customer trust within hours.

This is where Recovery as a Service (RaaS) — often called Disaster Recovery as a Service (DRaaS) has gone from being an IT line item to becoming a necessity. It is the safety net that protects NBFCs from disruptions while also satisfying regulators, investors, and customers alike. And that is what this blog explores. Let’s dive in.

NBFCs in India – The Current State of Affairs

The Reserve Bank of India (RBI) defines NBFCs as financial institutions registered under the Companies Act that provide financial services such as loans, advances, asset financing, leasing, and investment. They cannot accept demand deposits like banks, but their role in credit distribution is critical.

The RBI has further rolled out the Scale-Based Regulation (SBR) framework, classifying NBFCs into layers: Base, Middle, Upper, and Top. The larger and more systemically important an NBFC is, the closer its obligations mirror those of a bank. In effect, some NBFCs today are regulated almost like banks, with stricter rules on governance, risk, and operational resilience.

So, when an NBFC faces downtime, whether IT system crashes or cyberattacks, causing delayed loan approvals, stalled collections, and stressed customers, the consequences unfold quickly.

What Gets in the Way of Disaster Recovery for NBFCs

Recovery in Lending Operations

Collections have always been tricky, particularly in unsecured lending or stressed MSME portfolios. Regulators now require NBFCs to recover dues while treating customers fairly. RBI’s Fair Practices Code explicitly warns against coercive recovery tactics.

That means recovery infrastructure, such as call centers, digital repayment platforms, communication systems, must stay up even during disruptions. If they go down, borrowers can’t pay, leading to a rise in complaints and compliance risks. In recovery, downtime directly affects NBFC’s continuity.

Disruptions from External Events

Natural disasters, public health emergencies, and utility failures have shown how quickly NBFC operations can be affected. Branch closures or system downtime directly delay loan disbursals and repayments.

Cybersecurity Threats

As NBFCs digitize more services, cyber incidents have become frequent. Ransomware, phishing, and data theft directly threaten customer information. RBI’s recent circulars on IT governance and cyber resilience make boards and senior executives personally responsible for preparedness. Recovery drills must now be documented and auditable. In short: “having a plan” is not enough, NBFCs must prove they can execute.

Costs and Scale

Traditional disaster recovery setups, like secondary data centers, duplicate servers, and backup IT teams, require heavy investment. They make sense for the very largest NBFCs, but mid-tier players often can’t sustain the cost. And when the business grows, scaling those setups is slow and expensive.

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Recovery as a Service: The Cloud Advantage

The Reserve Bank of India's Master Direction on Information Technology Governance, effective from April 1, 2024, mandates comprehensive business continuity and disaster recovery plans for NBFCs classified in the Top, Upper, and Middle Layers. Under the regulatory framework, disaster recovery as a service for banks and NBFCs must address specific requirements including defined Recovery Time Objectives (RTO) and Recovery Point Objectives (RPO) based on asset criticality, failover capabilities for critical systems such as Loan Origination Systems (LOS) and Loan Management Systems (LMS), and secure data handling protocols  

Recovery as a Service (RaaS) offers NBFCs a way through these requirements. Instead of building and maintaining physical recovery sites, workloads and data are replicated to the cloud in near real time. If the primary systems fail, operations can switch to a recovery environment within minutes.

Why this matters?

• Lower costs: Pay-as-you-go pricing replaces heavy upfront capital expenditure.
• Regulatory compliance: Built to match RBI and SEBI continuity rules, with audit-ready reporting.
• Scalability: Capacity can grow or shrink with business demand.
• Better recovery metrics: Recovery Time and Recovery Point Objectives (RTO/RPO) shrink from hours or days to minutes.
• Integrated security: Features like immutable backups, encryption, and live monitoring protect against cyber risks.

For NBFCs, RaaS ensures customers can repay, regulators can audit, and business continuity is demonstrated under pressure.

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Regulatory Mapping: Directives Driving DRaaS Adoption

RBI’s IT Governance and Cybersecurity Framework

The RBI has been tightening its stance for years, starting with its IT framework for NBFCs and updating requirements steadily. Current expectations include:

• Data localization: Sensitive financial data must stay within the country.
• Encryption and access controls: Customer and transaction data must be protected by default.
• Multi-region resilience: NBFCs should be able to withstand localized outages.
• Evidence of testing: Recovery drills must be logged and presented when inspected.

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Business Continuity Standards

NBFCs must maintain seamless customer services, even during disruption. That means disbursement platforms, repayment systems, and communication lines must be operational without pause.

SEBI’s Expectations

For NBFCs operating in capital markets, SEBI’s business continuity guidelines add another layer. They call for:

• Hybrid models combining cloud-based failover with physical redundancy.
• Scenario-based testing that includes cyberattacks, not just natural disasters.
• Board oversight, with senior leaders formally approving continuity frameworks.

Local and Global Context

Domestically, regulators encourage NBFCs to work with providers offering Indian data residency, reducing cross-border compliance risk. NBFCs dealing in securities or operating as market intermediaries must also comply with SEBI’s BCP/DR regulations. Globally, frameworks like the Basel Committee’s Principles for Operational Resilience set benchmarks that investors expect NBFCs to meet. Together, these pressures make disaster recovery readiness both a compliance issue and a market expectation.

RaaS Implementation Framework for NBFCs

Prioritizing Critical Workloads

Not all systems are equal. Implementation begins with comprehensive Business Impact Analysis (BIA) to classify applications and data by criticality. Implementations involve mapping out RTO/RPO thresholds per asset, streamlining recovery priorities, and backup policies. This approach enables NBFCs to allocate resources effectively and meet regulatory requirements.

Critical systems requiring priority attention include:

• Core banking applications and loan management systems
• Customer relationship management platforms
• Payment processing and settlement systems
• Regulatory reporting and compliance databases
• Customer data repositories and transaction logs

Building Governance Around Recovery

RBI has made it clear: the board and top management are accountable. That means oversight committees, independent audits, and clear reporting lines. Staff readiness matters too. Regular simulations and training make sure teams know what to do when systems switch over.

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Choosing the Right Provider

A recovery partner must align with RBI and SEBI guidelines, host data within India, and demonstrate proven reliability. It’s also wise to check exit terms — NBFCs should be able to move providers without putting data at risk.

Hybrid Cloud Architecture Design

Modern disaster recovery as a service for banks leverages hybrid cloud architectures, combining on-premises infrastructure with cloud-based recovery capabilities. Successful implementations utilize dual-region strategies with primary operations in major financial centers and disaster recovery sites in geographically separated locations.

The architecture typically includes:

• Cross-account isolation for production and disaster recovery environments
• Real-time data replication with continuous monitoring
• Automated failover and failback orchestration
• Integration with existing fintech ecosystems and API services

Security and Compliance Integration

DRaaS implementation for NBFCs must address stringent security requirements mandated by RBI guidelines. This includes end-to-end encryption using AES-256 for data at rest and TLS 1.2+ for data in transit, cloud-native key management service integration for regulatory compliance, and comprehensive access controls with multi-factor authentication.

Security measures extend beyond technical controls to include:

• Regular security audits and compliance assessments
• Incident response procedures aligned with regulatory requirements
• Vendor risk management for third-party service providers
• Continuous monitoring and threat detection capabilities
• Data sovereignty compliance for India-specific requirements

Few other steps in DRaaS Implementation of NBFCs include:

Securing Replication

Replication should include not just operational data but also KYC, audit trails, and compliance logs. Cyber defenses like immutable backups and zero-trust access are increasingly necessary to guard against ransomware.

Testing and Proving Readiness

Quarterly or semi-annual drills have become the norm. Automated testing helps NBFCs validate recovery times while producing reports that satisfy regulatory inspections.

Linking IT Recovery to Loan Recovery

If repayment platforms or customer communication lines go down, collections stall and NPAs rise. Keeping these systems alive during disruptions directly protects an NBFC’s financial position.

Monitoring and Improving Continuity

Recovery is not one-and-done. Monitoring tools should track uptime, record incidents, and feed insights back into planning. This keeps resilience frameworks in sync with a growing business.

DRaaS Implementation for NBFCs: Technology Stack and Integration Considerations

Multi-Cloud Compatibility

Modern disaster recovery as a service for banks support multiple cloud platforms including AWS, Microsoft Azure, Google Cloud Platform, and Oracle Cloud. This flexibility enables NBFCs to select optimal platforms based on cost, compliance, and technical requirements while avoiding vendor lock-in scenarios. Key technology components include:

• Cloud-native backup and replication services
• Database replication and synchronization tools
• Network connectivity and VPN solutions
• Identity and access management systems
• Monitoring and alerting platforms

Application-Specific Considerations

NBFCs must also address specific application requirements when implementing disaster recovery solutions. Core banking systems, loan origination platforms, and customer management applications each require tailored recovery approaches aligned with business criticality and regulatory requirements.

Some of the critical integration points:

• API connectivity for fintech partner services
• Real-time transaction processing capabilities
• Customer authentication and authorization systems
• Regulatory reporting and compliance databases
• Mobile application and digital banking platforms

Partnering with Cloud4C for Comprehensive DRaaS Solutions

This is where the choice of a capable partner makes all the difference. NBFCs need a provider that not only delivers recovery technology but also understands the regulatory and operational pressures they operate under.

Cloud4C stands as a trusted partner delivering best-in-class Disaster Recovery as a Service solutions. Our comprehensive DRaaS offerings are specifically designed to address the unique requirements of India's financial services sector, ensuring robust business continuity while maintaining cost-effectiveness and regulatory compliance.

Cloud4C's DRaaS solutions provide NBFCs with enterprise-grade disaster recovery capabilities through our unique 4-way Disaster Recovery architecture, supporting deployment across any hyperscaler or private, hybrid, and multi-cloud environments. Our proven track record includes successful implementations for leading financial institutions, achieving audit success rates, and delivering great cost savings compared to traditional disaster recovery methods.

With 24/7 global support, automated failover and failback orchestration, and comprehensive compliance management, Cloud4C enables NBFCs to focus on core business growth, and help maintain the highest standards of operational resilience and regulatory adherence.

Contact us to know more.

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