What’s happening with Fino Payments Bank stock: CEO’s arrest as GST probe looks into shell companies, betting funds

Shares of Fino Payments Bank came under heavy pressure on Monday after the lender disclosed that its Managing Director and CEO, Rishi Gupta, had been arrested under India’s Goods and Services Tax (GST) law.

The stock slumped as much as 14 per cent in morning trade before trimming some losses to trade about flat by 10.30 am, even as the benchmark Nifty 50 was down about 1.2%.

Arrest linked to GST probe, says bank

Fino confirmed to the stock exchanges late on Friday that Gupta’s arrest was linked to an investigation involving its business partners and that it was “not related to the bank’s own GST compliance.”

In a fresh clarification on Monday, the bank said the probe concerns “programme managers associated with multiple banks,” and stressed that “the bank and Gupta have nothing to do with the actions of the programme managers.”

The Directorate General of GST Intelligence (DGGI) is probing suspected GST evasion routed through shell companies and payment aggregators, allegedly used to move illicit funds generated by online money gaming (more accurately called betting), which is banned in India, according to reports.

These reports also stated that investigators believed several crores of rupees may be involved, spread across shell and non-existent entities and multiple intermediaries.

GST authorities have arrested Gupta under Sections 132(1)(a) and 132(1)(i) of the Central and State GST Acts, which deal with fraudulent availment or utilisation of tax credit and offences involving large amounts. Reports also indicated that a “senior bank functionary” was found to be involved in the alleged fraud during the initial phase of the investigation.

Leadership shake-up amid expansion plans

Fino said Chief Financial Officer Ketan Merchant would oversee operations in Gupta’s absence, in an effort to reassure customers, partners and regulators that day-to-day functioning remains unaffected. The arrest came barely a month after the Reserve Bank of India approved Gupta’s reappointment as MD and CEO.

The bank is at a crucial transition point: in December, it received RBI approval to convert from a payments bank into a small finance bank, which would allow it to take larger deposits, lend, and broaden its product suite beyond its current narrow mandate. As of Monday morning, Fino had not shared further details about the case, but said it continues to cooperate with authorities.

For now, investors appear worried about regulatory overhang and reputational risk just as Fino prepares for a higher-stakes phase of growth. How the DGGI probe unfolds—and whether any formal findings link the core bank to the alleged evasion—will be key to determining how long that overhang lasts.