DPDP Compliance for Indian SMEs – What the Law Actually Requires

TL;DR (DPDP Act, 2023)

The Digital Personal Data Protection Act, 2023 applies to Indian SMEs, but it does not expect enterprise-level compliance. DPDP focuses on reasonable safeguards, transparency, and accountability, scaled to the size and risk profile of the organisation. For most SMEs, structured documentation and basic processes are sufficient as a starting point.

Introduction

The Digital Personal Data Protection Act, 2023 (DPDP Act) applies to all organisations that process personal data in digital form in India.

However, one of the biggest misconceptions around DPDP compliance is the assumption that small and medium businesses must comply in the same way as large enterprises.

This is incorrect — and often harmful.

Over-engineering DPDP compliance leads to unnecessary cost and confusion, while under-preparing creates avoidable regulatory and reputational risk. The key lies in understanding what DPDP actually requires from SMEs, not what large enterprises choose to implement.

This article explains DPDP obligations from an SME-specific, practical perspective.

Is DPDP Applicable to SMEs?

Yes.
DPDP applies to any organisation that processes personal data digitally, regardless of size.

However, applicability does not mean uniform expectations.

The DPDP framework is principle-based, not prescriptive. This means:

  • The obligations exist for everyone

  • The depth and complexity of implementation is proportional to risk, scale, and context

This distinction is critical for SMEs.

DPDP Is Principle-Based, Not a Checklist Law

Unlike some international data protection regimes, DPDP does not provide a long checklist of mandatory controls for every organisation.

Instead, it is built around core principles, including:

  • Purpose limitation

  • Consent and transparency

  • Reasonable security safeguards

  • Accountability for data processing

For SMEs, compliance is less about ticking boxes and more about demonstrating structured intent.

If an SME can show that it has:

  • Thought about how it handles personal data

  • Documented those decisions

  • Put basic processes in place

…it is already far better positioned than most.

What DPDP Actually Expects SMEs to Have in Place

At a foundational level, Indian SMEs should be able to demonstrate the following:

1. Transparency Through a Privacy Notice

SMEs should clearly explain:

  • What personal data is collected

  • Why it is collected

  • How it is used

  • How long it is retained

  • What rights individuals have

This does not need to be legalistic, but it must be accurate and accessible.

2. Consent Mechanisms Where Required

Where DPDP requires consent:

  • Consent must be free, informed, and specific

  • Individuals must be able to withdraw consent

Importantly, DPDP does not require consent for all processing. SMEs should avoid collecting consent unnecessarily.

3. A Defined Way to Handle Data Principal Rights

SMEs should have:

  • A clear contact point for rights requests

  • An internal process to respond

  • A way to record requests and actions taken

This can be managed with simple SOPs and registers — no complex tooling is required at early stages.

4. A Basic Data Retention & Deletion Approach

DPDP expects organisations to:

  • Retain personal data only as long as needed

  • Delete or anonymise data when the purpose is fulfilled

For SMEs, this usually means:

  • Defining retention logic

  • Periodically reviewing stored data

Not building automated deletion systems.

5. Breach Readiness (Not Breach Perfection)

DPDP does not expect SMEs to prevent all breaches.
It expects them to be prepared.

This means:

  • Knowing what constitutes a breach

  • Having a response plan

  • Being able to notify affected parties where required

Preparedness matters more than sophistication.

6. Awareness of Vendor & Third-Party Risk

If vendors process personal data on behalf of the SME:

  • The SME remains accountable

  • Basic data protection clauses should exist

  • Breach escalation expectations should be clear

This is one of the most commonly overlooked DPDP obligations.

What DPDP Does Not Automatically Require from SMEs

Unless the organisation’s scale or risk profile demands it, DPDP does not automatically require SMEs to:

  • Appoint a Data Protection Officer

  • Conduct formal Data Protection Impact Assessments

  • Implement enterprise-grade compliance tools

  • Replicate GDPR-style frameworks

DPDP recognises proportionality.

SMEs are expected to act responsibly — not to mirror large corporations.

The Real DPDP Risk for SMEs

The biggest risk for SMEs is not missing a clause.

The real risk is:

  • Having no documented structure

  • Responding to issues reactively

  • Being unable to demonstrate intent or process

In DPDP, reasonable effort plus documentation carries significant weight.

A Practical Way Forward for SMEs

For most SMEs, DPDP readiness starts with:

  • Clear documentation

  • Simple internal SOPs

  • Defined responsibilities

  • Basic record-keeping

This creates a defensible compliance posture without unnecessary complexity.

Closing Thought

DPDP compliance for Indian SMEs is not about perfection.
It is about credibility, clarity, and preparedness.

Starting with a structured foundation is often enough to meet early-stage expectations and reduce long-term risk.

Related Resource

Organisations looking for a structured starting point may explore
DPDP360 Compliance Starter Kit designed specifically around DPDP obligations for Indian SMEs.

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