Fino Payments Bank Stock Crashes 19% on ED Probe Report

Introduction

Shares of Fino Payments Bank Ltd. experienced a significant downturn, plunging as much as 19% on Monday to hit 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 Enforcement Directorate (ED) investigation into online gaming transactions associated with the bank. This development has amplified investor concerns, particularly following the recent arrest of the bank's Managing Director and CEO, Rishi Gupta, in a related matter.

The Catalyst for the Plunge

The market's negative reaction was swift after reports circulated about a potential ED probe. The stock's value eroded significantly, declining nearly 34% over the past month. The core of the issue stems from an ongoing investigation by the DGGI into alleged Goods and Services Tax (GST) evasion by certain entities. The media speculation suggested this probe could escalate, bringing in the Enforcement Directorate to investigate financial trails linked to online gaming platforms that used the bank's services through third-party program managers.

Fino Bank's Official Clarification

In response to the market turmoil and media speculation, Fino Payments Bank issued a detailed 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 probe is focused on certain program managers and merchants associated with multiple banks, including Fino, and does not pertain to the bank's own GST compliance. The management firmly denied any direct or indirect engagement in or promotion of gaming or betting activities through any of its platforms.

Arrest of the CEO and Leadership Transition

The situation was compounded by the earlier arrest of Managing Director and CEO Rishi Gupta on February 27, 2026, 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 under investigation. To ensure operational continuity, the board appointed Chief Financial Officer (CFO) Ketan Merchant as the interim head to oversee the bank's day-to-day functions.

Investigation Details Summarized

To provide clarity, the bank has outlined the scope and nature of the current investigation. The key points are summarized below:

Operational Stability Amidst Crisis

Despite the leadership crisis and negative market sentiment, Fino Payments Bank has sought to reassure stakeholders by highlighting its operational stability. The bank recently informed the bourses that its deposit balances grew by nearly 9% over the past two weeks, reaching an all-time high of approximately ₹2,900 crore as of March 13, 2026. Furthermore, it reported strong customer acquisition, with around 1.5 lakh new banking accounts opened since February 27, averaging nearly 10,000 new accounts daily. On 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.

Market Reaction and Volatility

The stock's performance has been highly volatile. After crashing to its all-time low of ₹136, the share price showed some recovery following the bank's clarifications. On certain trading days, the stock erased significant intraday losses to trade flat or marginally positive as the management actively communicated with analysts and investors to address concerns. However, the stock remains significantly down over the past month, reflecting persistent investor caution. At one point, the bank's market capitalization stood at around ₹1,600 crore.

Implications for Small Finance Bank Transition

The ongoing investigation and the arrest of its CEO have cast a shadow over Fino Payments Bank's strategic plans, particularly its proposed transition into a small finance bank (SFB). The bank had received regulatory approval in December to convert into an SFB, which would allow it to offer a broader range of services, including credit products and acceptance of larger deposits. The current uncertainty could potentially impact the timeline and regulatory view of this crucial transition.

Conclusion

Fino Payments Bank is navigating a period of intense scrutiny. The sharp fall in its stock price reflects market anxiety over unverified reports of an ED probe and the confirmed arrest of its CEO. While the management has been proactive in its clarifications, emphasizing that the investigation is external to the bank's direct operations, investor confidence remains fragile. The bank's future trajectory, including its SFB conversion plans, will likely depend on a swift and favorable resolution of the ongoing DGGI investigation.