Fintech and payments industry preparing a 'safe harbour' proposal

Payments Council of India has engaged independent consultants to draft framework to be submitted to RBI

The fintech and payments industry is preparing a working paper to propose a ‘safe harbour’ framework for the sector, said people familiar with the matter. 

The move follows the arrest of Fino Payments Bank chief, Rishi Gupta, over alleged evasion of the goods and services tax (GST), which the bank said was linked to an investigation involving its business partners and was not related to its own GST compliance. Gupta was arrested on February 27 this year and granted bail nearly a month later, on March 26. His arrest, and a similar case involving another fintech, had spooked the industry, insiders said. 

“There has to be a safe harbour for licensed entities, which have followed all the norms prescribed by the Reserve Bank of India (RBI),” said Vishwas Patel, director, Self-Regulated PSO Association (SRPA) , a self-monitoring body for the payment system operator (PSO) industry. 

The Payments Council of India has engaged independent consultants to draft a framework for introducing the safe harbour provisions. The framework is likely to be submitted to the RBI soon. 

“The Payments Council of India is working on a paper on how a safe harbour can be created for such licensed players from regulatory action when they have followed all laid-down processes,” Patel told Business Standard. 

Singapore is among the jurisdictions being studied for such legal safeguards for the sector, a person familiar with the matter said. 

A safe harbour provision would shield entities from liabilities or penalties, including retrospective ones, provided they abide by clearly defined regulatory and compliance requirements. 

The push for a safe harbour framework comes as companies seek greater operational certainty amid concerns over retrospective regulatory and tax action in an increasingly complex ecosystem overseen by multiple agencies and regulators. The discussion gains importance as the digital payments ecosystem continues to grow and regulations governing the sector take shape. 

The industry remains divided over the extent of the liability a company’s management should bear for irregularities committed by its clients. 

At the heart of the Payments Council of India’s safeguard harbour proposal is the argument that licensed entities in the payments industry are already regulated by the RBI and have undergone due process to secure regulatory approval, following which they are routinely audited by the regulator. 

“Currently, the trend is that if the end merchant facing the liability cannot be traced, the liability is presumed to rest with the company, which is then required to ensure the relevant taxes are paid,” said a senior executive at a Mumbai-based fintech firm. 

For instance, Fino Payments Bank CEO Rishi Gupta was arrested over alleged GST evasion linked to merchants within the real money gaming (RMG) sector. The arrest was related to the alleged evasion by three programme managers of the bank. These are intermediaries who source and refer merchants for payment processing to companies. 

“There should not be overarching measures in levying major liabilities on licensed entities,” the executive quoted above said. “There has to be some safe harbour, either by the RBI or the home ministry, when all rules are followed,” he added. 

The bank has maintained that it followed “adequate due diligence and know-your-customer (KYC) norms” at the time of onboarding programme managers or merchants, adding that it did not bypass any processes for the merchants or programme managers in question. 

The company has also clarified that these alleged evasions pertain to transactions carried out by managers in the RMG segment before the Centre banned the category in August 2025. 

In another case, two co-founders of fintech NeoKred Technologies, Tarun Nazare and Rohith Reji, were sent to judicial custody in April in an alleged GST evasion case linked to online betting and gambling. 

A top fintech official said that regulatory ambiguity around skill- and chance-based games, coupled with the perception of the sector’s association with online gambling and betting, had prompted the company to stop onboarding such merchants more than a year ago. 

“As a company dealing in payments, we would also want a safer merchant ecosystem, overall,” said another fintech founder.