Fino Payments Bank Stock Plunges 19% on ED Probe Report

Introduction

Shares of Fino Payments Bank Ltd experienced a significant downturn on Monday, tumbling as much as 19% to reach a 52-week low of ₹136.35. The sharp sell-off was triggered by a media report suggesting that the Directorate General of GST Intelligence (DGGI) might recommend an investigation by the Enforcement Directorate (ED) into online gaming transactions associated with the bank. This development has amplified investor concerns, especially following the recent arrest of the bank's Managing Director and CEO, Rishi Gupta.

The Catalyst for the Sell-Off

The immediate cause for the stock's sharp decline was speculation about a potential ED probe. Reports indicated that the DGGI's ongoing investigation into alleged GST evasion could be escalated. This news led to heavy selling pressure on the counter, with the stock price hitting an all-time low and declining nearly 34% over the past month. The market reacted swiftly to the perceived risk of a wider investigation by a central agency, reflecting deep-seated concerns about the bank's operational oversight and associations.

Fino Bank's Official Clarification

In response to the market turmoil and media reports, Fino Payments Bank issued a clarification to the stock exchanges. The bank stated that it is not currently subject to any investigation by any authority other than the DGGI, Hyderabad. It emphasized that the ongoing DGGI probe pertains to certain program managers and merchants who are associated with multiple banks, including Fino, and is not related to the bank's own GST compliance. The company further reiterated that it does not directly or indirectly engage in, or promote, any gaming or betting activities through any of its platforms.

Arrest of CEO Rishi Gupta

The situation was compounded by the earlier arrest of MD and CEO Rishi Gupta on February 27, 2026. He was arrested under the provisions of the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) Acts. The bank has maintained that neither it nor Mr. Gupta, in his official capacity, has any role in the business operations of the program managers in question. The management has described claims of GST liability against the bank as "completely baseless and factually incorrect," citing a positive view from legal advisors.

Leadership and Operational Stability

To ensure business continuity, the bank's board appointed Ketan Merchant, the Chief Financial Officer, as the interim head to oversee day-to-day operations. Despite the leadership crisis, the bank has attempted to project operational stability. On March 14, 2026, it reported that its deposit balances had grown by 9% over the preceding two weeks, reaching an all-time high of approximately ₹2,900 crore. During a business update call on March 2, management confirmed that customer balances were maintained at ₹2,250 crores with a daily throughput of ₹1,300 crores.

Key Factual Summary

Impact on Future Plans

The ongoing controversy has cast a shadow over Fino Payments Bank's ambitious plan to transition into a small finance bank (SFB). The bank had received in-principle approval from the Reserve Bank of India (RBI) on December 5, 2025, a significant milestone. An SFB license would allow it to accept larger deposits and offer credit products, expanding its business scope. However, the investigation and the arrest of its top executive could lead to increased regulatory scrutiny and potentially delay the transition process.

Market Reaction and Analysis

The stock's performance has been volatile. After the initial plunge, the share price saw some recovery as the management issued clarifications and held conference calls to address stakeholder concerns. However, the underlying uncertainty remains. The core issue revolves around the bank's due diligence and monitoring processes for its program managers, who source merchants for UPI transactions. While the bank distances itself from their actions, the investigation highlights potential risks in its business model. The market will likely remain cautious until there is complete clarity from the investigating agencies.

Conclusion

Fino Payments Bank is navigating a period of significant challenge. While the management's efforts to reassure investors with data on operational stability are noteworthy, the overhang from the DGGI investigation and the CEO's arrest continues to weigh on investor sentiment. The bank's ability to resolve these issues decisively will be critical for its future, particularly for its planned conversion into a small finance bank.