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 to transition into a small finance bank (SFB), following the arrest of its MD & CEO, Rishi Gupta, in connection with alleged GST-related violations. The bank said that, as matters stand, it remains on track to complete the transition into an SFB well within the 18-month timeline stipulated by the regulator in its in-principle approval.

 

Ketan Merchant, CFO, Fino Payments Bank, 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.”

   

“We continue to operate on our preparations on SFB plans for which we have got a regulatory timeline of 18 months,” he said, adding that despite this news coming across, 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 Managing Director and Chief Executive Officer 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 the 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. “As things stand now, whilst we continue to proactively engage with the RBI, until now we have not seen any kind of messages or something which 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. Fino 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 were at approximately Rs 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, which itself is a testimony of our faith of our customers, business partners, associates, business correspondents and merchants,” he said.

 

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 crore 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.

 

The bank and its officials have nothing to 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 the pre-conditions is that the merchants referred by the programme manager(s) need to have an existing banking relationship with another bank for facilitating the UPI transactions,” it said.