Fino is the first and the only payments bank so far to apply for conversion into an SFB.
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.
The in-principle nod came nearly two years after Fino applied for an SFB licence. As an SFB, Fino will be able to lend to individuals and companies.
On Friday, Gupta was arrested under the provisions of Section 132(1)(a) and 132(1) (i) of CGST and SGST Act, 2017.
And, Ketan Merchant, chief financial officer (CFO), was appointed head of the organisation by the board to oversee the day-to-day operations of the bank in the absence of Gupta.
“Normally, tax-related issues would not warrant a rethink by RBI on its nod to Fino to transition into an SFB, unless something very serious comes out of this issue,” said a former RBI official.
Section 132(1)(a) pertains to cases where a person supplies goods or services without issuing an invoice, or issues an incorrect or false invoice, with the intent to evade tax.
Section 132(1)(i), meanwhile, covers attempts to commit or abet any of the offences specified under the Act.
Punishment under Section 132 varies depending on the quantum of tax involved, with higher thresholds attracting imprisonment of up to five years along with a fine. Certain offences are cognisable and non-bailable, subject to the amount allegedly involved.
The payments bank has come out in support of Gupta saying the alleged GST violations pertain to an investigation involving certain programme managers who maintain relationships with multiple banks, including Fino Payments Bank.
The bank clarified that neither Gupta nor the bank had any involvement in the actions of these programme managers.
According to Abizer Diwanji, founder, NeoStrat Advisors LLP, if the proposed conversion into an SFB is impacted at all, it is likely to be in the area of customer onboarding, which may come under closer regulatory scrutiny.
“I do not think the RBI approval for Fino’s transition into an SFB would be affected. The arrest of Gupta appears excessive. While the development could trigger a more detailed investigation to establish the facts, it should not, in itself, have a bearing on the regulatory approval process. Unless any direct implication or governance lapses emerge, the RBI is unlikely to revisit its approval for Gupta’s reappointment as MD & CEO for another three-year term,” said Diwanji.
Gupta’s term was extended by the RBI in January for another three years, effective May 2, 2026.
He is one of the founders of Fino PayTech, the holding company of Fino Payments Bank.
He joined the group in 2007 as chief operating officer (COO) and CFO, later serving as MD and CEO of Fino PayTech until May 2017.
Finance Minister Nirmala Sitharaman has taken note of the developments, after Mohandas Pai, chairman of Aarin Capital and Manipal Global Education Services, posted on X questioning the arrest.
The Payments Council of India (PCI) has also written to the finance minister, raising “institutional concerns” on the arrest of Gupta.
The payments’ body said it was seeking to place certain broader principles pertaining to accountability attribution in a multi-layered regulated ecosystem.
 "Rishi Gupta, managing director (MD) and chief executive officer (CEO), Fino Payments Bank")
