Fino PB sees no uncertainty over SFB nod from RBI after CEO's arrest

Bank's transition into SFB on track; no financial impact so far from the events that have unfolded

Fino Payments Bank on Monday said there has been no indication from the Reserve Bank of India (RBI), suggesting any uncertainty over its in-principle approval for Fino’s transition into a small finance bank (SFB).

 

This follows the arrest of its managing director (MD) and chief executive officer (CEO) Rishi Gupta in connection with alleged goods and services tax (GST)-related violations.

 

The bank said, as matters stand, it remains on track to complete the transition into an SFB well within the 18-month deadline stipulated by the regulator.

  Shares of the lender ended flat at ₹192.15 on the BSE on Monday, even as the broader market declined 1.29 per cent amid geopolitical tensions.

 

Ketan Merchant, chief financial officer (CFO), who is heading the bank in the absence of Gupta, said, “There have been various meetings which have happened across all the levels in the RBI. As things stand now, there is no impact whatsoever which we have been made to understand on our SFB plan.”

 

He added, “We continue to operate on our preparations for SFB despite this news coming across and our liquidity has been intact.”

 

In an exchange disclosure, the bank stated it has been proactively engaging with all stakeholders, including the regulators to ensure transparency and commitment.

 

“We expect to complete the process before the stipulated timeline,” the bank said.

 

Responding to queries on whether Gupta’s position as MD and CEO could be impacted following the incident, and whether the bank is prepared for such an eventuality, Merchant said Fino Payments Bank is professionally run and has a defined second line of command, like other banks.

 

“We are a professionally driven bank, and the testimony of that is also evident from the fact that our businesses, despite such an event, have been holding up,” he said.

 

In late January, Gupta received RBI’s nod to continue as MD & CEO of Fino Payments Bank for another three years, starting May.

 

Merchant highlighted that the bank clarified to the RBI that this issue pertained to a particular programme manager.

 

He said, “As things stand now, while we continue to proactively engage with the RBI, until now we have not seen any kind of messages that should concern us in our normal banking operations.”

 

In December last year, RBI granted its in-principle approval for the conversion. Fino has up to 18 months to make the transition into an SFB. It is the first and the only payments bank so far to apply for conversion into an SFB.

 

The bank also clarified that it does not see any financial liability at this point on account of the matter in question, and all its operations and businesses are working as usual. “All our teams are committed to ensure there is no inconvenience caused to our customers, business partners, programme managers and any other business affiliates,” the bank said.

 

Merchant said that, at this juncture, the bank is maintaining enhanced monitoring and prudential buffers to ensure continuous stability.

 

“Customer balances on February 26 was around ₹2,250 crore, and today, as I speak, it stands intact and more. Our business volumes over the last three days have been maintained without any impact. This itself is a testimony of the faith our customers, business partners, associates, business correspondents and merchants have,” he added.

 

The bank has vehemently denied evading any GST dues and is compliant with all the regulations relating to payment of GST.

 

“The bank has not issued any alleged fake invoice. All invoices issued are based on the services utilised by the programme manager(s) / merchants. The bank has made its GST payments and complies with related regulations with respect to the fees / revenue earned by the bank,” it said.

 

According to reports, an investigation by the Directorate General of GST Intelligence (DGGI) into alleged banned online money gaming has led to the arrest of Gupta. The DGGI is probing suspected GST evasion of several crores linked to online money gaming activities, which are stated to be banned.

 

The bank said investigation by the DGGI was in relation to the programme manager(s) associated with multiple banks, including Fino Payments Bank, and not on the GST compliance of the bank itself.

 

Programme managers are the entities who source merchants for the bank for UPI transactions.

 

Programme managers are the entities who source merchants for the Bank for UPI transactions.

 

The bank and its officials have nothing do with the business / actions of the programme manager(s) in question, it said, adding that the bank does not directly or indirectly engage / or promote any kind of betting activity through any forum, website, platform or in any form.

 

According to the bank, its programme manager / merchant onboarding process is in line with the regulatory requirements and the said due process has been followed. “Onboarding is being done by the concerned business / relevant teams and not the MD & CEO of the bank. Further, as part of the onboarding checks, one of pre-condition is that the merchants referred by the programme manager(s) need to have existing banking relationship with other Bank for facilitating the UPI transactions,” it said.