V Keshavdev

The Directorate General of GST Intelligence, Hyderabad unit, has arrested Rishi Gupta, managing director and CEO of Fino Payments Bank, in connection with an alleged online betting-linked GST evasion case.

According to a stock exchange filing by the company, Gupta was taken into custody in Mumbai at 3:55 a.m. on February 27 under Sections 132(1)(a) and 132(1)(i) of the Central and State Goods and Services Tax Acts, 2017.

According to officials cited in reports, investigators suspect the routing of nearly ₹3,000 crore linked to betting app transactions through banking channels. The broader betting network under scrutiny is estimated to involve transactions of about ₹13,000 crore.

The development comes at a significant juncture for the Mumbai-headquartered payments bank, which had received in-principle approval from the Reserve Bank of India in December to convert into a small finance bank. The proposed transition would allow Fino to accept term deposits without the earlier ₹2 lakh cap on savings accounts and to build a full-fledged lending business, including MSME and mortgage loans.

A December analyst report had noted that the SFB conversion could materially improve the bank’s margins and return ratios over the medium term, with lending projected to contribute 20–25% of revenue within three years of transition.

Market participants are expected to watch regulatory developments closely, particularly around governance implications and the final approval of the SFB licence for the bank which currently enjoys a market cap of Rs 1,600 crore. The stock, which is down 25% year-to-date, could come under pressure when the market opens on Monday.

The GST probe centres on allegations that funds generated through betting apps were moved through a network of entities, including certain digital solution firms, and that dummy merchants were onboarded to facilitate gaming services without invoices, allegedly leading to GST evasion exceeding ₹30 crore.

The bank in the filing mentioned that the investigation relates to certain business partner(s) of the bank and does not pertain to the bank’s own GST compliance, and that none of its other bank officials are involved.

“The bank is co-operating with the authorities to provide all the necessary information. Presently there is no impact on the Bank,” the statement said, adding that appropriate disclosures would be made if any future impact arises.

Following the arrest, the bank convened a special board meeting on Friday evening between 6:45 p.m. and 7:06 p.m. The board has appointed chief financial officer Ketan Merchant as head of the organization to oversee day-to-day operations in Gupta’s absence until further resolution.