A day after Fino Payments Bank disclosed the arrest of its Managing Director and Chief Executive Officer Rishi Gupta in an investigation by Goods and Services Tax (GST) authorities, sources in the know said that the investigation relates to funnelling of “illicit funds from online money gaming”– a banned activity.
It is learnt that the GST authorities have been tracking the trail of illicit funds generated from real-money online gaming into non-KYC compliant bank accounts and shell entities which led to the detection of the alleged involvement of the bank’s CEO.
“In the Fino Payments Bank case arrest, DGGI is investigating a case of online money gaming, which is banned. Initial investigation indicates GST evasion of several crores involving many shell and non-existent entities, payment aggregators etc. which have been used to funnel the illicit funds being generated by online money gaming. Investigation conducted so far has brought out the involvement of a senior bank functionary in the fraud, who has been placed under arrest,” a source in the know said.
The Hyderabad unit of the Directorate General of GST Intelligence has been probing the matter, which is said to involve routing of about Rs 3,000 crore linked to real-money gaming through banking channels.
Online gaming transactions of over Rs 13,000 crore are under the scanner of the tax authorities in this case, officials said.
“The routing of funds from online money gaming through banking channels and several shell entities was being monitored closely from some time. The money was being routed through non-KYC compliant accounts and entities and eventually led to this trail to the (Fino Payments) Bank,” an official told The Indian Express.
The Promotion and Regulation of Online Gaming Act, 2025, effective October last year, imposes a ban on online money games including games of chance and skill. Advertising and promotion of such games is prohibited and financial transactions related to these platforms cannot be processed by banks or payment systems.
Story continues below this ad
A day after the CEO’s arrest, several industry leaders took to social media to register protest against the manner of the arrest, with many terming it as an “overreach”, prompting Finance Minister Nirmala Sitharaman to intervene.
In a post on social media platform X, former Infosys CFO and co-founder of proprietary venture capital fund Aarin Capital TV Mohandas Pai questioned the Gupta’s arrest for an issue with a business partner, urging the FM to intervene, to which Sitharaman said she “will check”.
“Madame @nsitharaman please see this. How can a ceo of a regulated bank be arrested for an issue with a business partner? Is this not overreach. @FinMinIndia has given vast powers for GST. What is the safeguard for citizens against misuse?please intervene,” Pai wrote.
“Thanks for sharing this. Will check,” Sitharaman responded to Pai’s post.
The social media exchange prompted many industry leaders to post their issues, flagging similar such cases of overreach by authorities against them.
“Don’t know the full story behind fino payments CEO, Rishi Gupta’s arrest, but overreach by tax authorities & judiciary are common. I am also fighting baseless FIRs right up to Supreme Court. @FinMinIndia @nsitharamanoffc,” said Anupam Mittal, founder and CEO of People Group and Shaadi.com.
There is a need to get rid of these onerous provisions and create an enabling environment if world-beating companies have to come out of India, he added.
Fino Payments Bank’s CEO Gupta has been arrested under the provisions of Section 132(1)(a) and 132(1)(i) of the Central GST (CGST) Act and State GST (SGST) Act, 2017, respectively. In an exchange filing late Friday, the Bank said the ground of arrest was issued on February 27 at 03:55AM (Indian Standard Time), a move that has been questioned by many industry leaders and tax experts on social media as being timed ahead of the weekend holiday.
The sections that Gupta has been charged with relate to supply of goods or services or both without issuance of any invoice, with the intention to evade tax, in addition to cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 5 crore, with imprisonment for a term which may extend to five years and with fine.
The bank had said the investigation was relating to “business partner(s) of the bank and not relating to the GST compliance of the bank”.
The lender said that none of the bank officials are involved, and this is an investigation relating to the business partner(s) of the bank. In absence of Gupta, Ketan Merchant, Chief Financial Officer of the Bank was appointed as the head of the organisation by the Board on Friday.
On Saturday, Merchant in a statement said the bank is a regulated entity, and is compliant with all the laws, including GST.
“The issue is with regards to a GST investigation pertaining to programme managers who have relationship with other banks including Fino Payments Banks Limited. The bank and its MD & CEO – Rishi Gupta have nothing to do with the actions of the programme managers. We have full faith in the country’s judiciary and will continue to extend full cooperation and assistance to the authorities in the on-going process,” the statement said.
Team Chartered Online. Reach us at admin@charteredonline.in