According to Business Standard, Fino Payments Bank board has accepted Rishi Gupta's resignation as MD and CEO on Thursday, even after the board found him 'fit and proper' to lead Fino as managing director and chief executive officer for a second term. Gupta had earlier requested voluntary early retirement, citing his desire to explore new avenues outside the lender. The resignation comes after Gupta's arrest on February 27 in an investigation related to alleged fake goods and services tax invoices by a business partner of Fino, causing loss of income for the government. Gupta was subsequently granted bail on March 26 and had been seeking to return to his leadership role. In his letter to the board, Gupta expressed pride in Fino becoming the only Payments Bank to receive the in-principle approval of RBI for conversion to Small Finance Bank and stated it was an appropriate time to explore new opportunities after investing two decades in Fino.
As reported by Business Standard, the board stated that it is of the view that no prima facie case could be made out against Mr Rishi Gupta based on consideration of documents available with the bank, including legal opinions and reports received. This assessment suggests the board believes Gupta's arrest was not related to any issues within the bank's operations or compliance. The board had initially approved Gupta's extension as head of the organisation before the arrest, but the turn of events forced the board to keep the reappointment process on hold until a reassessment of his role in the GST case. The investigation involved alleged fake goods and services tax invoices by a business partner of Fino, causing loss of income for the government, but the bank maintained that Gupta continued to meet the standards required to hold the position of managing director and chief executive.
According to Business Standard, the board has extended interim CEO Ketan Merchant's tenure for a period not exceeding three months effective May 27, subject to RBI approval. Additionally, the board extended Anup Agarwal's tenure for up to three months as interim CFO with effect from July 6. These appointments provide continuity during the leadership transition period while the bank seeks a permanent replacement for Gupta. Merchant, the chief financial officer, was appointed as interim head after Gupta's arrest, and his extension ensures stability during the current leadership uncertainty.
As reported by Business Standard, Fino Payments Bank had previously clarified that Gupta's arrest was linked to an investigation involving its business partners and was not related to the bank's own GST compliance. The investigation involved alleged fake goods and services tax invoices by a business partner of Fino, causing loss of income for the government. This distinction is significant as it suggests the legal issues stem from third-party business relationships rather than internal bank operations or regulatory violations. The matter emerged during heightened regulatory and tax scrutiny of online gaming businesses in India, with all forms of real money gaming banned in the country since August last year. Gupta secured bail in March from the Special Judge for Trial of Economic Offences Cases in Hyderabad, nearly a month after his arrest.
According to Business Standard, Fino Payments Bank is seeking to become a small finance bank and is navigating leadership challenges in the aftermath of Gupta's arrest. The bank received the Reserve Bank of India's in-principle approval to convert into a small finance bank, which is expected to significantly expand the bank's operational scope beyond payments banking services. Payments banks in India operate under restrictions that limit lending activities, but transitioning into an SFB structure would allow the company to expand into broader banking services, including lending operations. However, the conversion comes during a challenging period for the broader small finance banking sector, with listed small finance banks reporting a 0.6% year-on-year decline in net profit during the first quarter of FY25, while provisions and contingencies more than doubled. Fino Payments Bank itself recently reported a sharp decline in quarterly profitability with fourth-quarter profit falling 70% to ₹7.1 crore.
