The year started positively for Fino Payments Bank when the Reserve Bank of India approved Rishi Gupta’s reappointment as MD and CEO for another three years. This news propelled shares up nearly 9% to ₹227 on January 28.
However, just weeks later, the bank found itself in turmoil. Investor confidence waned, and stock prices began to fall as uncertainty clouded its ambitions in the small finance banking sector.
The catalyst for this crisis was Gupta's arrest on February 27 by the Directorate General of GST Intelligence (DGGI) due to alleged GST evasion linked to a syndicate involved in illegal online gaming.
The DGGI claims Gupta was a key figure in a scheme that funneled funds through shell entities associated with Fino, with alleged evasion amounting to ₹840 crore from ₹3,000 crore in transactions.
Three program managers—PS Rao Digital Solutions, Billexpress Solutions, and Powerfin Technology—are central to the investigation, labeled as non-functional entities. They purportedly onboarded 36 shell merchants to facilitate the routing of gaming-related funds without paying GST.
Fino has asserted that neither the bank nor Gupta is involved in these activities, stating that all GST obligations have been settled and that it had already blocked real-money gaming merchants back in August 2025. The implicated program managers contributed only 8-10% of throughput, with no revenue from them recorded in Q3.
Fino's stock performance in March 2026 has been one of the most significant governance-related declines in recent Indian fintech history. After beginning the year at around ₹260, shares plummeted to a 52-week low of ₹167.8 by March 2, following Gupta's arrest.
Each attempt at recovery was thwarted by new negative news. On March 16, reports emerged that the DGGI might recommend an Enforcement Directorate (ED) investigation into the bank's transactions, leading to a further 17.3% drop in stock value.
By March 23, a court dismissed Gupta’s bail petition, resulting in a 20% decline in shares, which hit an all-time low of ₹112.1. The bank's market capitalization dropped from approximately $240 million at the year's start to around $100 million (₹940 crore).
Gupta was granted bail two days later under strict conditions, but the question of Fino's leadership and future remains critical. Investors are particularly concerned about whether the leadership meets the regulatory standards of trustworthiness and competence.
Fino's board has postponed seeking shareholder approval for Gupta's reappointment, indicating it will do so at an appropriate time, pending regulatory compliance and a reassessment of Gupta’s suitability. The RBI has yet to make a decision, and any delays in leadership changes could jeopardize Fino's small finance bank aspirations.
Experts believe the transition may survive but caution that tax-related issues alone are unlikely to prompt the RBI to withdraw its approval. Fino has stated it was given 18 months to complete its conversion to a small finance bank and expects to meet that timeline.
However, Gupta's arrest raises significant concerns about Fino's governance and risk management capabilities. Unlike established banks with robust compliance infrastructures, Fino's model relies heavily on third-party program managers, a dependency that complicates its pursuit of a full small finance bank license.
This crisis has highlighted a structural issue within Fino. The mandated shift to a payment aggregator-payment gateway model threatens its historical margin advantage. The conversion to a small finance bank was intended to provide higher-margin lending revenues to counteract the decline in legacy transaction business, but uncertainty surrounding leadership now complicates this goal.
The implications extend beyond Fino, prompting fintech and payments firms to strengthen internal controls and consolidate responsibilities amid concerns over liability. There is a growing demand for a clearly defined 'safe harbour' to ensure that companies can operate without the threat of retrospective action once compliance is achieved.
The Fino situation underscores a broader sector-wide reevaluation of liability management, particularly when digital financial operations involve multiple third-party intermediaries. The pressing question remains: how much risk can fintech companies effectively manage, and who will be held accountable when issues arise?
