The startup policy forum (SPF) on Sunday expressed concern over the recent arrest of Fino Payments Bank’s managing director and chief executive officer Rishi Gupta by the directorate general of GST intelligence (DGGI) in connection with an alleged GST evasion case, saying coercive action against fintech founders could set a “problematic precedent” for the sector.

Gupta was arrested on Friday under sections 132(1)(a) and 132(1)(i) of the CGST and SGST Acts, which pertain to the supply of services without invoices and the intent to evade tax. A PTI report on Friday, citing sources, said investigators were probing the use of shell companies and payment intermediaries to route funds connected to online money gaming activities, with suspected GST violations under scrutiny.

Following the arrest, Gupta was reportedly shifted to JJ Hospital in Mumbai after complaining of chest pain. He was later brought to Hyderabad on Saturday evening on a 72-hour transit remand for further interrogation.

The probe is allegedly linked to a massive international online gaming and betting syndicate involving transactions worth over ₹13,000 crore. Investigators suspect that nearly ₹3,000 crore of these illicit funds were routed through banking channels using shell entities and payment aggregators like Wegofin Digital Solutions.

Fino Payments Bank, in a regulatory filing, said the matter pertains to certain business partners and not to the bank’s own GST compliance. The lender added that it is cooperating with authorities and that chief financial officer Ketan Merchant has been asked to oversee operations in the interim.

Fino Payments Bank not a member of the forum

In a statement, SPF said it has been closely monitoring developments, adding that Fino Payments Bank is not a member of the forum and that it is not aware of the specifics of the case.

“We respect that law enforcement authorities act on their assessed reasons and do not seek to interfere in this matter,” SPF said.

However, the industry body noted that several of its fintech members have raised concerns that coercive action against founders — particularly in cases potentially stemming from alleged violations by business partners — could create uncertainty within the startup ecosystem.

SPF said it has long advocated stronger coordination between law enforcement agencies and fintech companies and recently raised related concerns in a meeting with the department of financial services.

The forum stressed the need for better understanding of fintech business models among tax and enforcement authorities. “Coercive measures like arrests for tax law violations should be exercised with extreme caution and only when truly necessary,” the statement said, calling for broader alignment among stakeholders.