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Market Plunges on Probe News
The market reacted sharply to growing regulatory worries surrounding Fino Payments Bank, sending its shares to a historic low. This sharp drop reflects investor concern over allegations of money laundering and GST evasion linked to online gaming transactions, a sector facing increased scrutiny.
Probe Details Emerge
Fino Payments Bank is at the center of a probe by the Directorate General of GST Intelligence (DGGI). The controversy escalated with the arrest of CEO Rishi Gupta on February 27, 2026, under GST laws. The DGGI investigation reportedly focuses on alleged GST evasion and moving illicit funds, possibly totaling ₹10,000 crore, linked to online betting and gaming. Authorities suspect shell companies and payment intermediaries were used to hide fund origins, prompting a look under the Prevention of Money Laundering Act (PMLA). Fino Payments Bank denies direct involvement, stating the DGGI probe targets program managers and merchants linked to several banks, not its own GST compliance. The bank also called media reports about its CEO's bail being rejected 'factually incorrect'. CFO Ketan Merchant is now interim CEO.
Stock Price and Valuation Hit
On Tuesday, March 24, 2026, Fino Payments Bank's stock plunged 19% to an all-time low of ₹113.55 on the BSE amidst heavy trading volumes, with about 4.78 million shares changing hands. This follows a 25% drop in the previous two days and a 45% fall last month, heavily underperforming market indexes. The stock's current trading price is near its 52-week low of ₹135.87. With a market cap around ₹1,161 crore as of March 23, 2026, and a Price-to-Earnings (P/E) ratio between 16.22 and 18.36, the stock's valuation is under pressure. These figures indicate investors are re-evaluating the bank's risk and future earnings due to regulatory challenges.
Sector Faces Increased Scrutiny
The Fino Payments Bank situation comes amid tighter regulatory oversight in India's fast-growing digital payments sector. While the sector is set for significant growth, with digital payment volumes expected to rise 24% annually through FY30, regulators are closely watching intermediaries for compliance and anti-money laundering measures. Payment banks, focused on financial inclusion, are vulnerable when their platforms handle high-volume, potentially illicit transactions. Fino Payments Bank had recently received RBI approval in December 2025 to convert into a Small Finance Bank (SFB) to expand its services. However, the current regulatory scrutiny could complicate this move, potentially affecting approvals or investor confidence. SFBs have shown strong growth, with total deposits reaching about ₹3.77 lakh crore by December 2025.
Risks and Potential Consequences
Despite Fino Payments Bank's claims of compliance and denial of direct involvement, its CEO's arrest and the DGGI probe pose significant risks. A potential PMLA probe by the Enforcement Directorate (ED) could lead to stricter anti-money laundering rules and heavy penalties. Reputational damage from links to alleged money laundering and GST evasion, especially regarding online gaming, could erode customer trust and business ties. Increased regulatory oversight on payment gateways could mean stricter merchant onboarding, potentially slowing transaction volumes and revenue. The bank's SFB conversion, a key growth plan, could be jeopardized if regulatory concerns persist.
Credit Watch and Analyst Outlook
Credit rating agency ICRA placed Fino Payments Bank's ratings on 'Watch with Developing Implications' on March 10, 2026, citing uncertainty from the probe and its impact on the bank's credit profile. ICRA noted Fino's stable deposits and adherence to liquidity rules, but the 'watch' status signals caution. Analyst sentiment is mixed, with some reporting a 'Buy' rating and price targets near ₹345.00, while other technical analysis suggests negative trends. The DGGI investigation and potential ED involvement are critical factors for Fino's future, creditworthiness, and SFB conversion plans.