Fino Payments Bank CEO Rishi Gupta Arrested Under GST Act, ED Probe Highlights Business Partner Links
Arrest under CGST and SGST provisions tied to alleged ₹3,000 crore betting-linked transactions.
Bank clarifies probe concerns business partners, not its own GST compliance; CFO Ketan Merchant takes charge.
By Our Legal Correspondent
New Delhi: February 28, 2026:
In a development that has sent shockwaves through India’s financial sector, Rishi Gupta, Managing Director and CEO of Fino Payments Bank, was arrested on February 27, 2026, under provisions of the Central Goods and Services Tax (CGST) Act and State Goods and Services Tax (SGST) Act. The arrest was carried out by the Directorate General of GST Intelligence (DGGI) in Hyderabad.
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The case reportedly involves alleged routing of nearly ₹3,000 crore linked to online betting transactions through banking channels. While the bank has clarified that the investigation pertains to its business partners and not its own GST compliance, the arrest has raised serious questions about governance, compliance, and oversight in India’s payments banking sector.
Charges Against Rishi Gupta
- Sections Invoked: Gupta was arrested under Sections 132(1)(a) and 132(1)(i) of the CGST and SGST Acts, 2017.
- Nature of Allegations:
- Facilitating transactions linked to online betting platforms.
- Suspected GST evasion through routing of funds.
- Involvement of third-party business partners rather than direct bank operations.
- Grounds of Arrest: Issued at 3:55 a.m. on February 27, 2026, as per official filings.
Fino Bank’s Response
- Clarification: The bank stated that the probe is related to business partners and not its own GST compliance.
- Leadership Change: CFO Ketan Merchant has been appointed to oversee daily operations.
- Regulatory Filing: The bank assured investors and regulators that “presently there is no impact on the Bank.”
- Future Disclosure: Any material impact will be reported to stock exchanges as per SEBI regulations.
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Background of Fino Payments Bank
- Origins: Fino Payments Bank was launched in 2017, emerging from Fino PayTech Ltd., a fintech company focused on financial inclusion.
- Business Model:
- Provides banking services to underbanked and rural populations.
- Operates through a network of over 1,000 branches and 50,000 access points.
- Known for its partnerships with microfinance institutions and small businesses.
- Public Listing: Fino is the only publicly listed payments bank in India.
- Recent Milestone: In December 2025, Fino received RBI’s in-principle approval to transition into a Small Finance Bank (SFB), making it the first payments bank to achieve this. This would allow it to lend; a facility payments banks currently lack.
Enforcement Directorate’s Role
While the arrest was made under GST provisions, the Enforcement Directorate (ED) is expected to play a crucial role in investigating money laundering aspects:
- PMLA Angle: If betting-linked funds were laundered through banking channels, ED could invoke the Prevention of Money Laundering Act (PMLA).
- Asset Tracing: ED may trace assets linked to business partners and beneficiaries of the alleged transactions.
- Coordination with DGGI: ED often works alongside GST authorities in cases involving tax evasion and money laundering.
Impact on Banking Sector
- Investor Concerns: As Fino is publicly listed, the arrest has raised concerns about governance and compliance.
- Regulatory Oversight: RBI’s approval for conversion into a small finance bank may face delays pending investigation outcomes.
- Sectoral Implications: Payments banks, designed to promote financial inclusion, may face stricter scrutiny in partnerships and compliance.
Expert Opinions
- Legal Analysts: Stress that arrests under GST provisions highlight the seriousness of compliance lapses, even if linked to partners.
- Banking Experts: Warn that reputational damage could affect Fino’s transition into a small finance bank.
- Market Analysts: Note that while immediate impact on operations is limited, investor confidence could be shaken.
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Conclusion
The arrest of Rishi Gupta, CEO of Fino Payments Bank, under GST provisions marks a critical moment for India’s payments banking sector. While the bank insists the probe concerns its business partners, the case underscores the importance of compliance, transparency, and oversight in financial institutions. With the ED expected to investigate possible money laundering angles, the outcome will have far-reaching implications not only for Fino but for the broader payments and fintech ecosystem in India.
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