Fino PB MD & CEO arrest puts spotlight on merchant-sourcing networks

Industry examines oversight and risks tied to programme managers

The arrest of Fino Payments Bank Managing Director (MD) and Chief Executive Officer (CEO) Rishi Gupta has brought scrutiny on programme managers — intermediaries that source and refer merchants for payment processing — and raised questions about the extent of liability financial institutions face for the actions of their clients, industry sources said.

 

While programme managers source and bring business to organisations, the arrest of the bank’s chief has prompted the industry to question the accountability of merchants’ businesses despite prescribed due diligence, and whether such intermediaries could pose systemic risks.

 

“These are networks that have a certain reach and are strong in a particular area of business. A programme manager, like a reseller website, can have multiple clients who need payment processing and can offer such merchants in bulk,” an industry source said.

 

In Fino’s case, the arrest of its MD and CEO relates to alleged goods and services tax (GST) evasion by three programme managers whose business accounted for roughly 8 to 10 per cent of the company’s total annual throughput. This data was shared by Fino in a conference call (concall) following Gupta’s arrest.

 

The alleged evasions pertain to transactions carried out by these managers in the real-money gaming segment before the Centre banned the category in August 2025.

 

“As payment aggregators or banks, the responsibility for any alleged GST evasion by their merchants does not rest on the financial institution. The only GST liability is limited to the services rendered by the financial company to a particular merchant,” a source said.

 

A second source added that these managers should not become systemically risky to the company at a time when regulations and norms evolve over a period of time.

 

For instance, about 80 per cent of Fino’s business came from programme managers, with the rest coming from payment aggregators. This was shared by the company in the concall.

 

The management said that one of the criteria for onboarding merchants referred by programme managers was that they were required to have an existing banking relationship with other banks for facilitating Unified Payments Interface transactions.

 

“As a regulated entity, before acquiring any merchant, there is a due process to be followed, such as know-your-customer norms and other criteria. Programme managers don’t go through that process since they technically are not part of the system,” a second source said, adding that merchants onboarded through this funnel required stringent scrutiny.

 

Sources said that in this case, if merchants were already working with other banks, it was necessary to understand the reason for the arrest of a particular bank head.

 

“Many merchants are onboarded at any given time, and the CEO does not go through day-to-day operational aspects. The transactions were processed legally and were stopped when the ban came into place. The partners in question today have other banks as partners as well,” a source said.

 

Last month, Gupta was arrested under the provisions of Sections 132(1)(a) and 132(1)(i) of the Central GST and State GST Acts, 2017.