Fino Payments Bank CEO Arrested in India
The CEO of India's Fino Payments Bank has been arrested over compliance violations, sparking a debate across the country's fintech industry. The Payments Council has reportedly sent a letter to the Finance Minister, highlighting concerns about governance and risk management in the fast-growing instant payments sector.
The arrest of Fino Payments Bank's Managing Director and CEO, Rishi Gupta, on February 27, 2026, was carried out by the Directorate General of GST Intelligence (DGGI). The investigation centers on allegations of a ₹3,000 crore GST evasion scheme involving the funnelling of illicit funds from banned online gaming and betting applications through a network of shell companies. Fino Payments Bank has stated the investigation is not related to its own GST compliance but pertains to third-party business partners known as "programme managers" who source merchants for UPI transactions. The bank denies any involvement in betting activities, asserting that its merchant onboarding processes follow all regulatory requirements and are handled by business teams, not the CEO directly. The arrest triggered immediate consequences, including a sharp drop in the bank's stock price. In a move to ensure operational continuity, the board appointed Chief Financial Officer Ketan Merchant as the interim head to manage daily operations in Gupta's absence. The incident has drawn a sharp response from the fintech industry, with the Payments Council of India (PCI) writing to the Finance Minister to express concern. The letter highlights the risks of holding senior executives of regulated institutions personally liable for the alleged non-compliance of third-party partners, warning of the potential impact on governance and management continuity. This event unfolds at a critical juncture for Fino Payments Bank, which had recently received in-principle approval from the Reserve Bank of India (RBI) to convert into a Small Finance Bank. Such a transition would allow it to expand its services beyond payments to include lending, making robust governance and risk management frameworks even more critical. The arrest is seen by many as part of a broader trend of increased regulatory scrutiny over India's rapidly growing fintech sector. Industry leaders have raised concerns about potential regulatory overreach, arguing that such actions could create a chilling effect on innovation and investor confidence in one of the world's fastest-growing fintech ecosystems.
