Fino In Freefall, And A Race Against The Clock

The year began with a bang for Fino Payments Bank when the Reserve Bank of India cleared Rishi Gupta’s reappointment as MD and CEO for another three years, sending shares up nearly 9% to ₹227 on January 28. 

In less than 30 days, the bank went from regulatory validation into a full-blown crisis. Investor confidence rattled, stock got derailed, and clouds of uncertainty started looming over its small finance bank ambitions.

Reason? Gupta’s arrest and subsequent protracted hearings before the eventual bail this week.

On February 27, Gupta was handcuffed by the Hyderabad unit of the Directorate General of GST Intelligence (DGGI) on charges of alleged GST evasion under the CGST and state GST laws.

The DGGI alleged that Gupta was among the “masterminds” of a syndicate routing funds from illegal online gaming platforms through shell entities linked to Fino. The alleged evasion is pegged at ₹840 Cr, based on ₹3,000 Cr in transactions.

Three programme managers, namely: PS Rao Digital Solutions, Billexpress Solutions, and Powerfin Technology, are central to the probe. Investigators call them non-functional or dummy entities. 

Through Fino’s BAPA service, they allegedly onboarded 36 shell merchants to route gaming-linked funds without paying GST. Two of the entities named in the arrest memo were found to be non-existent at their declared addresses. They were allegedly running gaming platforms without invoices or proper GST disclosures.

Fino, however, has maintained that neither the bank nor its CEO is linked to these actions. It said that all GST dues on its revenues have been paid and that it had already blocked real-money gaming merchants in August 2025. The three programme managers accounted for 8-10% of throughput, with no such revenue recorded in Q3.

A Month Of Bloodbath

The story of Fino’s shares in March 2026 is one of the starkest governance-driven crashes in recent Indian fintech history.

The stock, which began the year at roughly ₹260 and had climbed further after Gupta’s appointment, went into a tailspin following his arrest. By March 2, Fino’s shares had crashed to a 52-week low of ₹167.8. 

Every time the stock tried to recover, fresh negative developments pulled it down again. On March 16, it was reported that the DGGI may recommend an Enforcement Directorate (ED) probe into the bank’s transactions after identifying multiple suspected money laundering transactions. 

Fino rejected the report as ‘non-factual and speculative’, but the stock plunged another 17.3% that day alone, touching ₹136 intraday.

On March 23, a bench comprising Chief Justice Aparesh Kumar Singh and Justice GM Mohiuddin dismissed Gupta’s writ petition seeking bail. The next day, shares collapsed 20%, hitting a fresh all-time low of ₹112.1. Fino’s market cap, which stood at approximately $240 Mn at the start of the year, had by this point cratered to around $100 Mn (₹940 Cr). 

Two days later, Gupta was granted bail by a special judge for trial of economic offences cases in Hyderabad, albeit under strict conditions.

Dark Clouds Over SFB Ambitions

As dramatic as it has been, the freefall of Fino’s stock may matter less than a bigger question now facing the bank. What happens to its leadership, and, therefore, its future?

Of all the issues around Fino right now, the most important one for investors is whether its leadership meets the regulator’s standards of being trustworthy, competent, and suitable to run the bank. 

Meanwhile, Fino’s board has deferred seeking shareholders’ approval on Gupta’s reappointment, stating it will do so at an ‘appropriate time’, subject to regulatory compliance, re-assessment of Gupta’s ‘fit and proper status’ by the Nomination and Remuneration Committee (NRC), and after a view is taken by the RBI.

The RBI is yet to rule on the matter. Any delay in introducing substantial leadership could pose a risk to its SFB ambitions.

Independent banking experts are of the view that the transition will probably survive, but with caveats. 

As per a CXO of a payments bank, tax-related matters alone are unlikely to prompt the RBI to reconsider its approval. Fino itself has maintained that the RBI gave it 18 months to complete the conversion, and the bank expects to meet that deadline.

However, the arrest inevitably casts a long shadow over Fino’s governance and risk management capabilities in the eyes of the regulator. 

Unlike established banks with decades of robust compliance infrastructure, Fino’s model appears heavily reliant on third-party programme managers for a significant portion of its business volume, a dependency that proved problematic here, and one that sits uneasily alongside the demands of a full SFB licence. 

“This reliance suggests a potential lack of direct control or inadequate due diligence over crucial partner activities, a critical flaw when seeking a full Small Finance Bank licence, which demands the highest standards of financial integrity,” one expert told Inc42.

Not Just Fino; A Sector-Wide Reckoning

The crisis has exposed a structural problem. The mandated shift to the PA-PG (payment aggregator – payment gateway) model, while necessary for compliance, directly attacks Fino’s historical margin advantage. 

The SFB conversion was meant to be the answer to this squeeze, offering higher-margin lending revenues to offset the decline in legacy transaction business. With the conversion timeline now clouded by leadership uncertainty, that relief is harder to count on.

Beyond Fino, the fallout is prompting fintech and payments firms across the board to tighten internal controls, with CXOs consolidating key responsibilities amid concerns over liability arising from employee or intermediary actions. 

There is a growing push for a clearly defined ‘safe harbour’ — the certainty that once regulatory compliance is met, companies can operate without the risk of retrospective action. One CXO told the Business Standard: “We have to be very careful going forward. A bunch of critical responsibilities are only being assigned to those with a very high degree of accountability.”

The Fino crisis is not just one bank’s regulatory headache. It is a sector-wide recalibration of how liability is understood and managed, especially when digital financial rails run through multiple third-party intermediaries. For now, the question is: how much risk can fintechs really contain, and who falls into the regulatory crosshairs when things go south?

MARKETS WATCH: NEW ISSUES, POST-IPO JOURNEY & MORE

• Rentomojo IPO Plans: RentoMojo has filed IPO papers with SEBI, planning a ₹150 Cr fresh issue and an OFS of 2.84 Cr shares. Existing investors and cofounder Geetansh Bamania will pare stakes.
   
• Groww Promoters Pledge ₹302 Cr Shares: Promoter entities of Groww have pledged 1.88 Cr shares worth ₹302 Cr to Aditya Birla Capital for personal reasons. The move comes months after its IPO, amid expansion into asset management and steady revenue growth.
• Paisabazaar Gets Benami Order: The PB Fintech’s lending arm has received a benami transactions order linked to vendor dealings, where it is alleged to be the beneficial owner. The company plans to challenge the order.
• Meritto Gets IPO Nod: NoPaperForms has received SEBI approval to proceed with its IPO, aiming to raise ₹500-600 Cr. Backed by improving financials, including a sharp rise in profits, the edtech SaaS firm plans a mix of fresh issue and OFS, with Info Edge set to pare its stake.

Edited by Shishir Parasher

The post Fino In Freefall, And A Race Against The Clock appeared first on Inc42 Media.