“The investigation by the DGGI related to the program manager(s) associated with multiple banks and not the GST compliance of the bank itself, and the bank and its officials have nothing to do with the business/actions of the program manager(s) in question,” Fino Payments Bank said in a filing with the regulator.
DGGI arrested Gupta on Friday for violating the law relating to Goods and Services Tax. He was “arrested under the provisions of sections 132(1)(a) and 132(1)(i) of the CGST and SGST Act, 2017.
The authority is investigating the use of so-called shell companies and payment aggregators to channel illegal funds generated by online money gaming.
Meanwhile, the bank says it does not directly or indirectly engage in or promote any form of gambling activity through any forum, website, platform or in any form.
The bank’s program manager or merchant onboarding process is in compliance with regulatory requirements and the said due process has been followed, the bank said.
“Onboarding is done by the concerned company or relevant teams and not by the MD & CEO of the bank. Further, as part of the onboarding checks, one of the conditions is that the merchants referred by the program manager(s) must have an existing banking relationship with another bank to facilitate the UPI transactions,” the report said.
The bank has not issued any so-called false invoice, adding that all invoices issued are based on the services used by the program manager(s) or vendors.
The bank has a robust risk management framework around merchant transaction monitoring for the use of the virtual payment address (VPA) provided by the lender, the bank said.
It is to be noted that the RBI has given a timeline of 18 months to complete the bank’s conversion into a Small Finance Bank, and the management expects to complete the process before the stated timeline.
The arrest of the director and CEO of the payment bank surprised the sector and market players. Industry bodies such as the Payments Council of India (PCI) and the Startup Policy Forum (SPF) supported Rishi Gupta.
Meanwhile, Finance Minister Nirmala Sitharaman, responding to social media posts, assured that the ministry would look into the matter.
PCI, which represents payment companies, wrote a letter about this to the Minister of Finance. The PCI sought urgent intervention and called for greater proportionality in enforcement measures.
PCI noted in its letter that regulated financial institutions operate within complex networks of merchants, technology partners and business correspondents.
Attributing personal liability to senior leadership in matters related to alleged non-compliance by third parties has significant implications for the continuity of governance, the report said.
“We believe it is important for the industry to raise concerns about proportionality and governance continuity when supervised institutions and their leadership are involved. We have presented these considerations to the Chancellor of the Exchequer in the spirit of constructive engagement,” said PCI Chairman Vishwas Patel.
Another industry body, Startup Policy Forum, which represents startups in India, said in a statement that it has been closely monitoring developments. Although Fino Payments Bank is not a member of SPF, the forum respects that law enforcement authorities act based on their assessments and do not attempt to interfere in the matter.
“However, several SPF members have expressed concern that such coercive measures against fintech founders, sometimes stemming from alleged violations by business partners, could set a problematic precedent for the industry.
Published on March 2, 2026
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