What Happened
- Rishi Gupta, Managing Director and CEO of Fino Payments Bank, was arrested on February 27, 2026, under Section 132(1)(a) and 132(1)(i) of the Central Goods and Services Tax (CGST) Act, 2017 and the State GST Act.
- The arrest is linked to alleged GST evasion through Fino's business partners (programme managers), who reportedly processed merchant transactions worth approximately ₹10,000 crore without issuing invoices, violating the GST Act.
- Investigators also linked the case to an alleged ₹13,000 crore online betting and gaming network, with approximately ₹3,000 crore in suspected betting funds routed through dummy merchant accounts using Fino's banking infrastructure.
- Fino Payments Bank maintained that the investigation relates to certain third-party business partners and not to the bank's own GST compliance, emphasising that the bank operates as a payment aggregator without liability for tax compliance of its merchants.
- CFO Ketan Merchant was appointed as interim Head of the Organisation during Gupta's absence.
- The Telangana High Court reserved its judgment on a writ petition filed by Gupta challenging his arrest.
Static Topic Bridges
GST Act Provisions on Offences and Arrests
The Goods and Services Tax (GST) framework, implemented from July 1, 2017, includes stringent penal provisions for tax evasion. Section 132 of the CGST Act lists cognisable and non-bailable offences for which arrests can be made. Section 132(1)(a) covers supply of goods or services without issuing invoices with the intent to evade tax; Section 132(1)(i) covers wrongful utilisation of input tax credit. Offences involving amounts exceeding ₹5 crore are punishable with imprisonment up to 5 years with fine. The GST Intelligence (Directorate General of GST Intelligence — DGGI) is the apex intelligence and investigation arm under the Ministry of Finance responsible for detecting major GST fraud.
- GST implementation date: July 1, 2017 (Article 279A of Constitution)
- CGST Act, 2017: Section 132(1)(a) — supply without invoice for tax evasion; 132(1)(i) — wrongful ITC use
- Non-bailable arrests: For evasion above ₹5 crore
- Punishment for >₹5 crore evasion: Up to 5 years imprisonment + fine
- DGGI: Directorate General of GST Intelligence — nodal investigation agency
- GST Council: Constituted under Article 279A; Finance Ministers of Centre + States
- Alleged evasion: ₹10,000 crore in undue transactions + ₹13,000 crore betting fund routing
Connection to this news: Gupta was arrested under exactly these provisions — Section 132(1)(a) for invoice-less transactions and 132(1)(i) for improper ITC — demonstrating how the GST enforcement architecture, initially criticised as toothless, is being used aggressively in high-value fraud cases involving financial sector intermediaries.
Payments Banks — Regulatory Framework and Limitations
Payments Banks are a differentiated banking category introduced by the Reserve Bank of India in 2015 based on the recommendations of the Nachiket Mor Committee on Financial Inclusion. They can accept deposits (up to ₹2 lakh per customer), issue debit cards, facilitate payments and remittances, and sell mutual funds and insurance products, but cannot issue credit cards, give loans, or advance credit. They are licensed under the Banking Regulation Act, 1949 and must maintain 75% of their demand deposit balances in Government Securities (SLR). Fino Payments Bank received its operating licence in 2017 and was listed on Indian stock exchanges in 2021.
- Payments Banks introduced: 2015 (based on Nachiket Mor Committee, 2014 recommendations)
- Regulatory authority: Reserve Bank of India (Banking Regulation Act, 1949)
- Deposit cap: ₹2 lakh per customer
- Permitted: Deposits, debit cards, payments, remittances, insurance/MF distribution
- Not permitted: Loans, credit cards, credit advances
- SLR requirement: 75% of demand deposits in Government Securities
- Fino Payments Bank: Listed in 2021; operates extensive Business Correspondent network in rural/semi-urban areas
Connection to this news: Fino's business model as a payments bank — specifically its large network of programme managers and agents who handle cash-in/cash-out and merchant transactions — is the vulnerability exploited in this case. The bank's infrastructure was allegedly used by third parties to route fraudulent transactions, raising questions about due diligence requirements for payments banks' programme manager relationships.
Online Gambling, Illegal Betting, and Money Laundering in India
Online gambling and betting (except for games of skill) are regulated by state laws under Entry 34, List II (State List) of the Seventh Schedule of the Constitution. Most states prohibit online gambling under state-level gaming acts. The Prevention of Money Laundering Act (PMLA), 2002 covers financial crimes including routing of illegal gambling proceeds through the banking system. The Enforcement Directorate (ED) is the primary agency for PMLA investigations. The GST Council has clarified that online gaming (including gambling) attracts 28% GST on face value. The Finance Act, 2023 amended the CGST Act to explicitly include online gaming in the taxable supply definition, creating clarity that evasion in this sector is now a GST offence.
- Constitutional basis for gambling regulation: Entry 34, List II (State Subject)
- PMLA 2002: Covers money laundering from proceeds of illegal gambling
- Enforcement Directorate: Investigates PMLA offences
- GST on online gaming: 28% on face value (Finance Act, 2023 amendment)
- Alleged scheme: ₹13,000 crore betting network; ₹3,000 crore routed via dummy merchant accounts on Fino's platform
- CGST Act (post-2023): Online gaming explicitly covered, closing earlier ambiguity
Connection to this news: The ₹13,000 crore online betting network at the centre of this case sits at the intersection of three regulatory domains — GST evasion (CGST Act), money laundering (PMLA), and payments regulation (RBI) — making the Fino case a landmark test of coordinated enforcement across these frameworks.
Key Facts & Data
- Arrested: Rishi Gupta, MD and CEO, Fino Payments Bank (February 27, 2026)
- Charges: CGST Act Section 132(1)(a) and 132(1)(i); SGST Act equivalent provisions
- Alleged invoice-less transactions: ~₹10,000 crore
- Alleged betting network: ~₹13,000 crore; betting funds routed via dummy merchants: ~₹3,000 crore
- Interim leadership: CFO Ketan Merchant appointed interim Head of Organisation
- Court: Telangana High Court reserved judgment on writ petition challenging arrest
- Payments Banks: Introduced 2015; deposit cap ₹2 lakh; no lending permitted
- DGGI: Directorate General of GST Intelligence — apex GST fraud investigation body
- GST on online gaming: 28% on face value (from 2023-24)
- PMLA 2002: Applies to proceeds of illegal betting/gambling routed through banking channels