Crisis-hit Fino Payments Bank has recorded a sharp fall in its UPI transaction volume and value over the past two months, reflecting the growing impact of regulatory scrutiny and enforcement action and the consequent slowdown in digital business.
The bank processed nearly 9.6 lakh UPI transactions worth Rs 83.5 crore in November 2025. By January 2026, volumes had dropped more than 50 percent to 4.6 lakh transactions, with value declining to Rs 46.6 crore.
These figures pertain to customer-initiated transactions conducted through bank accounts, including person-to-person transfers and merchant payments, both offline via QR code scans and online through ecommerce platforms.
The payments bank has a strong business-to-business (B2B) UPI business, and the data does not reflect the transactions from the merchant business.
The downturn follows last week’s arrest of the CEO, Rishi Gupta, by the GST department over alleged tax evasion amounting to Rs 840 crore for transactions worth Rs 3,000 crore, intensifying the crisis at the payments bank.
Digital transactions, UPI transaction value and digital revenue fall too
Fino has around 1.7 crore customers, and the firm caters to rural and semi-urban customers with an average annual income of around Rs 4 lakh.
The company has seen multiple challenges in its digital vertical ever since the March quarter (Q4) of FY 25, with most of the major indicators deteriorating over the last three quarters.
The company’s digital transaction count has declined from 89 million in Q4 of FY 25 to around 82 million by Q3 of FY 26.
Its digital throughput has also declined from Rs 75,000 crore in Q4 of FY 25 to Rs 66,000 crore in Q3 of FY 26.
Fino’s digital revenue has also fallen by half from Rs 117 crore in Q4 of FY 25 to Rs 62 crore in Q3 of FY 26.
The company management has acknowledged these challenges, including communication from law enforcement agencies (LEA) and regulators during the last two quarters' earnings call with investors.
Merchant business impact after the law enforcement agency challenges
The company’s active merchant count fell from a high of 254 in Q3, FY 25, to 175 at the end of Q2 of FY 26. However, this has recovered to 347 merchants during Q3 of FY 26, without any commensurate increase in transactions or revenue.
“What is happening is that the increased scrutiny which we have to do from LEA point of view, the regulator point of view, is affecting the onboarding of merchants, one is that it slows down the onboarding,” Gupta said in the December quarter earnings call.
The challenge stems from the fact that regulators asked the company to stop the Programme Manager model while onboarding merchants. These agents work on behalf of the bank to onboard merchants and conduct due diligence on the bank's behalf.
According to a source close to the regulator, they suspected that these channels were used to facilitate real-money gaming, betting and gambling. While betting and gambling were always illegal, RMG was banned in August 2025.
“So in the last one year there has been a big transition in terms of the entire regulation, monitoring, and onboarding for merchants for digital payments. And you can understand there is so much of focus from the PMO, the Ministry of Home Affairs, the LEAs, the regulator on the cyber digital frauds which are happening. So that is where we have slowed down this business just to have a better check and control in terms of the onboarding and the monitoring of transactions.” Gupta added in the conference call.
Fino has also acknowledged that the company has been asked by the regulator to move towards a payment aggregator model rather than its Programme Manager model, and this has also impacted its margins.
"What we have also started to do, there have been recent guidelines which have come from RBI as recently as in November 2025, which talk about onboarding of PA-PG platforms. So, as I mentioned also, we are now pushing more on PA-PG platforms or PA-PG companies, but the revenue margins in that is very low compared to a program manager kind of a platform," Gupta said in the earnings call.
This has also resulted in the company seeing many merchants dropping off the platform, some of which were not kosher.
“You onboard the merchant, and then you start some transactions, then there are issues which might come up with LEA, or there could be some chargeback issues. On account of that, you keep on relooking at the basket of merchants you have, and you block them or you close them… Obviously, we have done a much stricter onboarding,” Gupta added in the investor call.
High UPI transaction frequency
The company’s UPI transaction throughput is relatively high for a bank that is focused on consumers with relatively lower income.
The bank’s average ticket size of a UPI transaction stood at Rs 2,900, around double of that of a typical UPI transaction. Interestingly, the monthly average balance of the typical customer was around Rs 2,500.
The average transaction count of 55 per quarter for their customer base is unusually high for the bank’s customer base.
"The rough extrapolation appears to be based on an assumption that divides aggregate throughput
by the entire customer base without accounting for the underlying transaction mix and
active user base. Such a methodology does not accurately reflect actual customer
behaviour," the company said in a response to Moneycontrol queries.
Out of the 1.7 crore customer base, around 60 lakh are digitally active customers, according to Fino.
"As such, UPI is largely used by our customers to make small value payments, P2P as well as P2M.
In addition, aggregate throughput figures also include the B2B component, which represents business-related transaction flows and should not be equated with individual retail customer spending," the company added.
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