Physical Storage Vendors Target DPDP Compliance Budgets as BFSI Entities Assess Hybrid Data Risks

What happened

A recent OpenPR release states that businesses are rethinking physical document storage in response to the Digital Personal Data Protection Act, 2023. Myriad Storage System LLP is marketing secure physical storage solutions to banks, hospitals, and government offices. The vendor positions access-controlled storage for ID copies, medical files, and signed forms as a compliance measure. The Vasai-based ISO 9001:2015 certified manufacturer has completed over 500 installations for clients including ISRO, SBI, Tata, and L&T. The report claims physical data security is becoming an integrated component of privacy strategy.

Does the DPDP Act apply here?

The scope of the DPDP Act is explicitly restricted to digital data. Section 3 states the Act applies to digital personal data collected in digital form, or in non-digital form and digitised subsequently. Purely physical records that remain non-digital fall completely outside the law. Banks and insurers rarely maintain purely physical workflows today. Most physical KYC forms, loan applications, and claim documents are scanned and digitised during onboarding. The physical retention of these digitised records creates a hybrid risk.

Legal implications under DPDP

Section 8(1) makes the Data Fiduciary strictly responsible for compliance regarding any processing undertaken by it or on its behalf. Fiduciaries must implement reasonable security safeguards to prevent personal data breaches. If an unauthorised actor accesses physical archives and uses those documents to compromise digital systems, the fiduciary faces immediate regulatory exposure. The DPDP Rules, 2025 require fiduciaries to intimate the Data Protection Board of India and affected Data Principals within 72 hours of a breach. Relying solely on software firewalls while leaving digitised source documents exposed creates a compliance gap.

Could this happen to you

BFSI compliance heads manage decades of legacy paper records alongside modern core banking systems. If a vendor or internal staff member mishandles physical KYC copies, the resulting identity theft often breaches digital accounts. An auditor or the DPBI will evaluate your complete security posture. They will ask to see access logs and physical controls for environments housing digitised paper records. Failure to implement reasonable security safeguards carries a penalty ceiling of up to 250 crore rupees. A physical breach that cascades into digital systems triggers the same mandatory reporting timelines and board-level scrutiny as a cyberattack.

What companies should do in the next 30 days

1. The Chief Compliance Officer should instruct department heads to map physical document archives against the digital Record of Processing Activities. Identify which physical files contain data digitised subsequently.

2. Legal teams need to review vendor agreements with physical storage providers. Section 8(2) requires a valid contract for any Data Processor engaged in processing activity.

3. The security team must integrate physical site managers into the breach response workflow. A physical compromise of digitised records should trigger the 72-hour DPBI reporting drill immediately. Assess your current readiness using the evaluation tool at freescan.complydp.com.

What to watch

Exactly 246 days remain until the 13 May 2027 hard compliance deadline. The intersection of RBI physical document retention mandates and DPDP digital security rules will demand close attention. We expect the DPBI to clarify how it views security safeguards in hybrid environments where paper documents act as the source for digital processing. Fiduciaries should monitor early enforcement actions to see if the Board issues penalties for physical breaches that compromise digital personal data.