Fino Payments Bank Denies GST Evasion After CEO Arrest

Fino Payments Bank has denied evading Goods and Services Tax (GST) or promoting betting activities after its Managing Director and Chief Executive Officer, Rishi Gupta, was arrested by the Directorate General of GST Intelligence (DGGI).

Gupta was arrested under Sections 132(1)(a) and 132(1)(i) of the CGST and SGST Act, 2017, in connection with an investigation into alleged illicit fund flows involving shell companies and payment aggregators linked to online money gaming.

In a regulatory filing, the bank said the investigation pertains to certain third-party programme managers associated with multiple banks and not to its own GST compliance.

“The investigation by the DGGI was in relation to the program manager(s) associated with multiple banks and not on the GST compliance of the bank itself,” Fino Payments Bank said, adding that neither the bank nor its officials were involved in the business activities of the programme managers under scrutiny.

The lender also clarified that it does not directly or indirectly promote betting through any platform, website or forum.

According to the bank, merchant onboarding and invoicing processes follow regulatory requirements. It said onboarding is handled by relevant business teams and not by the MD & CEO. As part of due diligence, merchants referred by programme managers must already have an existing banking relationship with another bank to facilitate TIPI transactions.

The bank further denied issuing any fake invoices, stating that all invoices are based on services used by programme managers or merchants. It also highlighted a “robust risk management framework” to monitor merchant transactions involving Virtual Payments Addresses (VPAs).

The arrest has surprised industry players, especially as the Reserve Bank of India has given the bank 18 months to complete its transition into a Small Finance Bank. The management has said it expects to complete the conversion within the stipulated timeline.

Industry bodies have stepped in. The Payments Council of India (PCI) wrote to Finance Minister Nirmala Sitharaman, seeking urgent intervention and urging proportionality in enforcement actions.

PCI Chairman Vishwas Patel said that attributing personal liability to senior leadership for alleged third-party non-compliance could affect governance continuity in regulated institutions.

The Startup Policy Forum (SPF) also expressed concern. While noting that Fino Payments Bank is not its member, SPF said some fintech founders worry that coercive action tied to alleged violations by business partners could set a troubling precedent for the sector.

Meanwhile, Sitharaman responded to social media posts, saying the ministry would look into the matter.