Fino Payments Bank Ltd Management Discussions

Economic review

Global economic review

Overview

Global economic growth declined marginally from 3.3% in 2023 to an estimated 3.2% in 2024. This was marked by a slowdown in global manufacturing, particularly in Europe and parts of Asia coupled with supply chain disruption and weak consumer sentiment. In contrast, the services sector performed more creditably.

The growth in advanced economies remained steady at 1.7% from 2023 to 2024 as the emerging cum developing economies witnessed a growth decline at 4.2% in 2024 (4.4% in 2023). On the positive side, global inflation was expected to decline from 6.1% in 2023 to 4.5% in 2024 (projected at 3.5% and 3.2% in 2025 and 2026 respectively). This decline was attributed to the declining impact of erstwhile economic shocks, and labour supply improvements. The monetary policies announced by governments the world over helped keep inflation in check as well.

The end of the calendar year was marked by the return of Donald Trump as the new US President. The new US government threatened to impose tariffs on countries exporting to the US unless those countries lowered tariffs for the US to export to their countries. This enhanced global trade and markets uncertainty and emerged as the largest singular uncertainty in 2025.

Regional growth (%)	2024	2023
World output	3.2	3.3
Advanced economies	1.7	1.7
Emerging and developing economies	4.2	4.4

(Source: IMF, KPMG, Press Information Bureau, BBC, India Today)

Performance of the major economies, 2024

United States: Reported GDP growth of 2.8% in 2024 compared to 2.9% in 2023.

China: GDP growth was 5.0% in 2024 compared to 5.2% in 2023. United Kingdom: GDP growth was 0.8% in 2024 compared to 0.4% in 2023.

Japan: GDP growth was 0.1% in 2024 compared with 1.9% in 2023.

Germany: GDP contracted by 0.2% in 2024 compared to a 0.3% decline in 2023.

(Source: CNBC, China Briefing, ons.gov.uk, Trading Economics, Reuters)

Outlook: The global economy has entered a period of uncertainty following the imposition of tariffs of products imported into the USA and some countries announcing reciprocal tariffs on US exports to their countries. This is likely to stagger global economic growth, the full outcome of which cannot be currently estimated. This risk is supplemented by risks related to conflicts, geopolitical tensions, trade restrictions and climate risks. In view of this, World Bank projected global economic growth at 2.7% for 2025 and 2026, factoring the various economic uncertainties.

(Source: IMF, United Nations)

Indian economic review

Overview

The Indian economy grew at 6.5% in FY2024-25, compared to a revised 9.2% in FY2023-24. This represented a four-year low due to a moderate slowdown within the Indian economy (marked by slower manufacturing growth and a decline in net investments). Despite the slowdown, India retained its position as the worlds fi_h-largest economy.

Indias nominal GDP (at current prices) was H330.68 trillion in FY2024-25 (H301.23 trillion in FY2023-24). The nominal GDP per capita increased from H2,15,936 in FY2023-24 to H2,35,108 in FY2024-25, reflecting the impact of an economic expansion. The Indian rupee weakened 2.12% against the US dollar in FY2024-25, closing at H85.47 on the last trading day of FY25. In March 2025, the rupee recorded the highest monthly appreciation since November 2018, rising 2.39% (arising out a weakening US dollar).

Inflationary pressures eased, with CPI inflation averaging 4.63% in FY2024-25, driven by moderating food inflation and stable global commodity prices. Retail inflation at 4.6% in FY2024-25, was the lowest since the pandemic, catalysing savings creation. Indias foreign exchange reserves stood at a high of $676 billion as of April 4, 2025. This was the fourth consecutive year when rating upgrades outpaced downgrades on account of strong domestic growth, rural consumption, increased infrastructure investments and low corporate leverage (annualized rating upgrade rate 14.5% exceeded the decade-long average of 11%; downgrade rate was 5.3%, lower than the 10-year average of 6.5%).

Gross foreign direct investment (FDI) into India rose 13.6% to $81 billion during the last financial year, the fastest pace of expansion since 2019-20. The increase in the year was despite a contraction during the fourth quarter of 2024-25 when inflows on a gross basis declined 6% to $17.9 billion due to the uncertainty caused by Donald Trumps election and his assertions around getting investments back into the US.

Growth of the Indian economy

	FY22	FY23	FY24	FY25
Real GDP growth (%)	8.7	7.2	9.2	6.5

(Source: MoSPI, Financial Express)

Growth of the Indian economy quarter by quarter, FY2024-25

	Q1 FY25	Q2 FY25	Q3 FY25	Q4 FY25
Real GDP growth (%)	6.5	5.6	6.2	7.4

The banking sector continued its improvement, with gross non-performing assets (NPA) for scheduled commercial banks (SCBs) declining to 2.6% as of September 2024, down from 2.7% in March 2024. The capital-to-risk-weighted assets ratio for SCBs stood at 16.7% as of September 2024, reflecting a strong capital position. Indias exports of goods and services reached $824.9 billion in FY2024-25, up from $778 billion in the previous fiscal year. The Red Sea crisis impacted shipping costs, affecting price-sensitive exports. Merchandise exports grew 6% YoY, reaching $374.1 billion.

Indias net GST collections increased 8.6%, totalling H19.56 lakh crore in FY2024-25. Gross GST collections in FY2024-25 stood at H22.08 lakh crore, a 9.4% increase YoY.

On the supply side, real gross value added (GVA) was estimated to expand 6.4% in FY2024-25. The industrial sector grew by 6.5%, supported by growth in construction activities, electricity, gas, water supply and other utility services.

Indias services sector grew at 8.9% in FY25 (9.0% in FY24), driven by public administration, defence and other services (expanded at 8.8% as in the previous year). In the infrastructure and utilities sector, electricity, gas, water supply and other utility services grew a projected 6.0% in FY25, compared to 8.6% in FY24. Meanwhile, the construction sector expanded at 9.4% in FY25, slowing from 10.4% in the previous year.

Manufacturing activity was subdued in FY25, with growth at 4.5%, which was lower than 12.3% in FY24. Moreover, due to lower public spending in the early part of the year, government final consumption expenditure (GFCE) is anticipated to have slowed to 3.8% in FY25, compared to 8.1% in FY24.

The agriculture sector grew at 4.6% in 2024-25 (1.4% in 2023-24). Trade, hotel, transport, communication and services related to broadcasting segment were estimated to grow at 6.4% in 2024- 25 (6.3% in 2023-24).

From a demand perspective, the private final consumption expenditure (PFCE) exhibited robust growth, achieving 7.2% in FY2024-25, surpassing the previous financial years rate of 5.6%. The Ni_y 50 and SENSEX recorded their weakest annual performances in FY25 in two years, rising 5.3% and 7.5% during the year under review respectively. Gold rose 37.7% to a peak of $3,070 per ounce, the highest increase since FY2007-08, indicating global uncertainties.

Total assets managed by the mutual fund (MF) industry jumped 23% or H12.3 lakh crore in fiscal 2025 to settle at H65.7 lakh crore. At close of FY25, the total number of folios had jumped to nearly 23.5 crore, an all-time peak. During last fiscal, average monthly systematic investment plan (SIP) contribution jumped 45% to H24,113 crore.

Foreign portfolio investments (FPIs) in India experienced high volatility throughout 2024, with total inflows into capital markets reaching approximately $20 billion by year-end. However, there was significant selling pressure in the last quarter, influenced by new tariffs announced by the new US government on most countries (including India).

Outlook

India is expected to remain the fastest-growing major economy. Initial Reserve Bank of India estimates have forecast Indias GDP growth downwards from 6.7% to 6.5% based on risks arising from US tari_ levies on India and other countries. The following are some key growth catalysts for India in FY26.

Tari_-based competitiveness: India identified at least 10 sectors such as apparel and clothing accessories, chemicals, plastics and rubber where the US high tariffs give New Delhi a competitive advantage in the American market over other suppliers. While India faced a 10% tari_ after the US suspended the 26% additional duties for 90 days, the levy remained at 145% on China, the biggest exporter to the US. Chinas share of apparel imports into the US was 25%, compared with Indias 3.8%, a large opportunity to address differential (Source: Niti Aayog).

Union Budget FY2025-26: The Union Budget 2025-26 laid a strong foundation for Indias economic trajectory, emphasizing agriculture, MSMEs, investment, and exports as the four primary growth engines. With a fiscal deficit target of 4.4% of GDP, the government reinforced fiscal prudence while allocating H11.21 lakh crore for capital expenditure (3.1% of GDP) to drive infrastructure development. The February 2025 Budget marked a shi_ in approach, with the government proposing substantial personal tax cuts. Effective April 1, 2025, individuals earning up to H12 lakh annually will be fully exempt from income tax. Economists estimate that the resulting H1 lakh crore in tax savings could boost consumption by H3-3.5 lakh crore, potentially increasing the nominal private final consumption Expenditure (PFCE) by 1.5-2% of its current H200 lakh crore.

Free trade agreement: In a post-Balance Sheet development, India and the United Kingdom announced a free trade agreement to boost strategic and economic ties. This could lead to a significant increase in the export competitiveness of Indian shipments in the UK across the textiles, toys, leather, marine products, footwear, and gems & jewellery sectors. About 99% of Indian exports to UK will enjoy zero-duty access tari_ cuts; India will cut tariffs on 90% of tari_ lines and 85% could become fully duty-free within 10 years.

Pay Commission impact: The 8th Pay Commissions awards could lead to a significant salary revision for nearly ten million central government employees. Historically, Pay Commissions have granted substantial pay hikes along with generous arrears. For instance, the 7th Pay Commission more than tripled its monthly salaries, raising the range from H7,000 to H90,000 to H18,000 to H12.5 lakh, triggering a widespread ripple effect.

Monsoons: The India Meteorological Department predicted an ‘above normal monsoon in 2025. This augurs well for the countrys farm sector and a moderated food inflation outlook. Easing inflation: Indias consumer price index-based retail inflation in March 2025 eased to 3.34 per cent, the lowest since August 2019, raising hopes of further repo rate cuts by the Reserve Bank of India.

Deeper rate cuts: In its February 2025 meeting, the Monetary Policy Committee (MPC) reduced policy rates by 25 basis points, reducing it to 6% in its first meeting of FY2025-26. Besides, Indias CPI inflation is forecasted at 4% for the fiscal year 2025-26. Li_ing credit restrictions: In November 2023, the RBI increased risk weights on bank loans to retail borrowers and NBFCs, significantly tightening credit availability. This led to a sharp slowdown in retail credit growth from 20-30% to 9-13% between September 2023 and 2024. However, under its new leadership, the RBI has prioritized restoring credit flow. Recent policy shi_s have removed restrictions on consumer credit, postponed higher liquidity requirements for banks, and are expected to rejuvenate retail lending.

(Source: CNBC, PIB, Business Standard, Times of India, Economic Times)

Mobile wallets are gaining popularity, projected to grow at a CAGR of 18.3% from 2024 to 2028. The market is expected to reach H531.8 lakh crore ($6.4 trillion) by 2028. The United Payments Interface (UPI) has become the dominant force in Indias digital payments landscape, accounting for 83% of the total payment volume by the end of CY 2024.

Digital wallets utilize various technologies to facilitate transactions, including Quick Response (QR) codes, Near Field Communication (NFC), and Magnetic Secure Transmission (MST). QR codes enable transactions by storing information, such as payment amounts and recipients that can be accessed through a phones camera or digital wallet scanning feature. NFC allows devices to share payment details through electromagnetic signals within close proximity. MST, on the other hand, generates a magnetic signal to conduct transactions securely on traditional card stripe machines and modern no-swipe credit card terminals. Once the stored card information is shared with the point-of-sale terminal, it is transmitted through payment gateways, processors and acquiring banks, ultimately reaching credit card networks to complete the payment.

Indias instant payment system, Unified Payments Interface (UPI), recorded just over 3,700 transactions per second in CY 2024, according to a recent report by Paysecure, outstripping peers like the global payments platform Skrill and Chinas Alipay, and making UPI by far the most used alternative payments method in the world.

Industry overview

India has emerged as a global leader in digital payments, supported by a strong ecosystem that encourages widespread adoption. The country has one of the highest adoption rates, driven by advancements in digital technology and payment infrastructure that make transactions easier and more cost-e_ective.

India accounts for about 46% of the global real-time payment volume, with 89.5 million transactions. In comparison, Brazil handles 29.2 million real-time transactions. Remarkably, Indias digital payment volume is higher than the combined total of the next four countries—Brazil, China, Thailand, and South Korea.

At the cross-country level, the adoption of digital payments is supported by factors such as banking penetration, technological advancements, the degree of formalization of the economy and younger demographics. India has been at the forefront of this payment revolution, with the UPI transforming the retail payment landscape. UPI has not only revolutionized domestic transactions but is also expanding globally, contributing to Indias leadership in real-time payments.

Indias payment architecture is influenced by a combination of factors, including technological advancements, agents, institutions and policy interventions. This transformation has fostered financial inclusion and inclusive growth, but it also presents new challenges for policymakers. As India continues to lead in digital payments, its model is being studied and replicated by other countries, further solidifying its position as a global leader in financial innovation.

The Indian Fintech market size is estimated at US$ 145.09 billion in 2025, and is expected to reach US$ 550.21 billion by 2030, at a CAGR of 30.55% during the period of 2025 to 2030. The Indian fintech industry has shown massive growth over the past few years. The nation is gradually becoming a hub for many Fintech startups. The government initiatives towards promoting the digitization of financial systems and a cashless economy have helped shi_ consumer focus towards digital alternatives for financial transactions and services.

Funding from diverse domestic and international stakeholders also contributed to the growth in digital payments. The rise of digital commerce, innovation in payment technology using AI, blockchain, the Internet of Things (IoT), real-time prices, and the introduction of mobile point of sale (POS) devices have also contributed to growth. 80% of the Banking activities at top banks in the country run on digital channels; the country also has remittance programs that include FXNetworks, InstaReM, and Remitly. Many of these companies launch innovation labs, partnering with fintech firms to develop Proof of Concept (POC) and roll out products. Reserve Bank of India (RBI) helps finance startups with loans for technology, while the government approved new banking licenses and increased the FDI limit in the insurtech sector.

In FY25, UPI transactions saw a 30% increase in value, reaching H260.56 trillion, up from H199.96 trillion in FY24. Transaction volume surged by 42%, rising to 185.85 billion transactions from 131.14 billion in the previous fiscal year. This growth highlights the rapid expansion of UPI adoption across India, particularly in regions beyond Tier 2 cities, as digital payments become a key pillar of the financial ecosystem. With over 80% share of total digital payment volumes, UPI has firmly established itself as Indias leading payment platform.

The adoption of Mobile Point of Sale (mPOS) devices among small merchants also grew steadily in 2024, contributing to the overall expansion of digital payments. Meanwhile, the micro-ATM segment saw increased demand, with the average cash withdrawal per transaction rising to H2,750. The gross transaction value was driven not only by traditional banking and ATM services but also by innovative products like UPI, mPOS, insurance and e-commerce solutions. Despite this growth, opportunities remain to address market gaps through better product pricing and distribution strategies to further enhance adoption across underserved regions.

UPI has transformed Indias digital payment landscape, making up 83% of total payment volume by 2024, a sharp rise from 34% in 2019. UPI transactions hit 17,221 crore, driving the overall payment volume to 20,787 crore. RBI highlights UPIs impressive CAGR of 74% over five years in boosting digital payments in India.

Government initiatives

The Indian fintech revolution with sustainable government initiatives played a pivotal role in fostering growth and innovation in the sector that positioned the country as a global leader in digital payments and inclusion. Here are some key initiatives that have contributed to this revolution:

Pradhan Mantri Jan Dhan Yojana: This initiative aims to increase financial inclusion by providing bank accounts to millions of people, enabling them to access various financial services directly. Over 551 million beneficiaries have been enrolled till April 2025, making it the worlds largest financial inclusion program. As of April 2025, more than H2.6 trillion has been deposited into these accounts.

India Stack: A set of APIs designed to build public digital infrastructure, facilitating collaboration between governments, businesses, start-ups and developers. India Stack supports both public and private digital initiatives, creating a cohesive ecosystem for fintech growth. By the end of February 2025, Aadhaar authentication transactions had crossed a cumulative total of 14,555 crore, with 225 crore transactions recorded in February alone marking a notable rise from previous months. The Aadhaar e-KYC service also continued to play a vital role in enabling digital identity verification, recording over 43 crore transactions in February 2025 and bringing the cumulative e-KYC total to more than 2,311 crore.

JAM Trinity (Jan Dhan-Aadhaar-Mobile): Combines financial inclusion (Jan Dhan), digital identity (Aadhaar), and mobile connectivity to enhance financial services accessibility. This has facilitated bank account openings for over 570 million previously unbanked adults. As of FY2025, more than 1.39 billion Aadhaar cards have been issued.

UPI: A scalable platform for digital payments across India. UPI transaction volumes have surged significantly, contributing to a cashless economy. In FY25, the total value of UPI transactions grew by 30%, reaching H260.56 trillion, up from H199.96 trillion in FY24. Meanwhile, the transaction volume saw a robust 42% increase, climbing to 185.85 billion from 131.14 billion in the previous year.

Digital India programme: To improve digital infrastructure and promote digital payments. Enhanced payment infrastructure with services like IMPS, BHIM, and UPI. The program has allocated over 3.3 trillion H in FY24 for digital infrastructure development. Regulatory support: To create a favourable regulatory environment for fintech innovation. Encourages start-ups and foreign investments, fostering a competitive fintech landscape. In 2025, Indias fintech sector attracted over US$ 9.37 billion of investments in equity funding across 576 deals.

(Source: PMJDY, PIB, PwC report)

Payments bank industry structure and developments

The payments bank sector in India has undergone significant growth since its inception, primarily focusing on streamlining payment processes, remittances, and expanding access to banking services. Meanwhile, Indias payments market has become increasingly segmented, with distinctions made between modes of payment, such as point-of-sale transactions (encompassing card payments, digital wallets, cash, and other methods) and online sales (including card payments, digital wallets, and others). Furthermore, the market is also categorized by end-user industries, including retail, entertainment, healthcare, hospitality, and various other sectors.

The expansion of digital payments extends beyond applications integrated with the UPI ecosystem. Payment cards, particularly credit cards, have demonstrated a robust increase in both user adoption and transaction volumes in India.

According to the Reserve Bank of India (RBI) data ATM usage has dipped significantly. In January 2025, there were 48.83 crore ATM cash withdrawal transactions, a decrease from 57 crore in January 2023 and 52.72 crore in January 2024. Despite this decline, cash remains a significant part of the Indian economy. Further, Reserve Bank of Indias (RBI) Half Yearly Payment Systems Report for December 2024 states that the number of credit card transactions in the country more than doubled from 208.67 crore in 2019 to 447.23 crore in 2024. The value of the transactions rose to H20.37 lakh crore from H7.13 lakh crore in the same period (2019-2024) due to online spending accounting for nearly half of all credit card transactions in the last financial year.

Payments banks in India have been instrumental in enhancing financial inclusion and digital payments since their inception. These banks are authorized to accept non-NRI demand deposits and issue ATM and debit cards, as well as Prepaid Payment Instruments (PPIs). They provide remittance services, internet banking, and act as business correspondents for other banks, facilitating utility bill payments and offering simple, non-risk-sharing financial services. The focus on payments and remittances is central to their operations, with a maximum account balance for customers capped at H2 lakh at the end of each day, increased from the original H1 lakh limit.

One of the key regulatory frameworks governing payments banks is their investment structure. They can invest up to 75% of their demand deposit balances in government securities or treasury bills with maturities of up to one year. This investment is recognized as eligible for maintaining the SLR. The remaining 25% must be held in current and time/fixed deposit accounts with other scheduled commercial banks to meet operational and liquidity needs. However, payments banks are not permitted to offer loans directly, which limits their revenue streams. To generate returns su_icient to pay interest on savings accounts, they rely on these investments.

The payments banks have successfully established a wide network of banking points across India. Fino Payments Bank alone has set up nearly 19 lakh merchant banking points, leveraging its own business correspondent channel, existing branch infrastructure and partner network. This extensive network is crucial for expanding financial services, especially in rural areas where traditional banking infrastructure may be limited.

The role of payments banks in promoting digital payments and financial inclusion cannot be overstated. They have been instrumental in facilitating transactions through assisted digital services and platforms like UPI, which has seen significant growth in the recent years. As of 2024-25, UPI continues to be a major driver of digital transactions in India, with billions of transactions processed monthly. This shi_ towards digital payments aligns with the governments vision of a cashless economy and has been supported by initiatives such as the Digital India Programme.

Payments banks ability to provide essential banking services, combinedwiththeirextensivenetworkandstrategicpartnerships, positions them as key players in the countrys financial landscape. As the fintech sector continues to evolve, payments banks are likely to remain at the forefront of innovation, driving further growth in digital transactions and financial services accessibility. There have been representations from industry bodies to allow payments banks to offer micro credit. Some payments banks have the opportunity to convert into small finance banks. If that happens then there is potential to unlock the value of their strong rural network and also strengthen their business models.

(Source: Mordor intelligence, Economic Times, Rbi.org, Moneycontrol, Times of India)

Company overview

The Bank is a leading Indian payments bank dedicated to delivering a comprehensive range of banking and financial services, with a focus on meeting the needs of underserved groups such as low-income families, small businesses, and rural communities. It offers essential services including savings and current accounts, money transfers, bill payments, and mobile recharges, which are fundamental for managing daily finances. Beyond these core services, the Bank has partnered with institutions to provide customized offerings like micro-insurance and micro-investments. These are specifically designed to address the unique needs of its target customer base. While payments banks cannot offer loans directly, they can refer customers to partner institutions for loan services, ensuring access to credit when needed. By providing these tailored financial solutions, the Bank aims to enhance financial inclusion and empower underserved communities by making financial services more accessible and affordable. In short, Fino is a multi-location, multi-product and multi-platform new age Bank.

Opportunities and threats

Opportunities

Rapid growth in digital payments: It presents a significant opportunity for payments banks to expand their services. UPI has become the backbone of Indias digital payments landscape, with a projected growth that could see it process over 100 crore transactions per day by FY27. Payments banks can leverage this trend by further expanding their UPI-based transaction services. The digital payments market in India is expected to reach $1.89 trillion by 2025, with a CAGR of 16.31% from 2025 to 2029, presenting a vast opportunity for payments banks to increase their market share.

Fintech market growth: The growth of the Indian fintech industry offers another avenue for payments banks to innovate and diversify their offerings. They can introduce new financial products in subsectors like BankingTech, PayTech, and InsurTech, attracting new customers and expanding their market presence. The fintech sector in India has seen significant investments, with the potential to continue growing as more start-ups emerge with innovative solutions. This environment encourages payments banks to collaborate with fintech companies to develop cutting-edge financial services. The market size was estimated at approximately US$ 106.2 billion in 2024, with projections indicating a potential reach of US$ 145 billion by 2025. This expansion is driven by increased digital adoption, a growing middle class, and supportive government initiatives like Digital India.

Bank-fintech partnerships: Bank-fintech partnerships offer a unique opportunity to enhance financial services by combining banks trust and infrastructure with fintechs innovation and agility. These collaborations enable banks to offer advanced products like AI-driven lending and digital wallets, while improving customer experience through seamless, personalized services. Additionally, such partnerships help expand into under-banked markets and maintain competitiveness in the digital landscape, creating a more secure and customer-centric financial ecosystem.

Government support and digitalisation: Government initiatives play a crucial role in supporting the expansion of digital services by payments banks. Programs like the Digital India and Digidhan Mission aim to promote digital financial services and a cashless economy. These initiatives can help payments banks reach a broader customer base, especially in underpenetrated markets. The governments push for digital payments is evident in measures to simplify KYC processes and enhance digital payment accessibility for MSMEs, as outlined in the Union Budget 2025-26.

Technological adoption among small merchants: The increasing adoption of technology among small merchants also presents a significant opportunity for payments banks. The use of mobile point of sale (mPOS) devices is growing, indicating a larger market for digital solutions tailored to small businesses and micro-entrepreneurs. Payments banks can capitalize on this trend by offering customized digital payment solutions that cater to the needs of these businesses. As merchant acceptance of digital payments increases, payments banks will have a larger customer base to serve, further expanding their reach and influence in the financial services sector.

(Source: Pwc report, NIC, PIB)

Threats

Competition in the fintech landscape: The Indian fintech sector is characterized by intense competition, with both traditional banks and fintech start-ups vying for market share. Traditional banks are now offering fintech-like services, such as early pay check access and no-fee overdra_s, making them strong competitors in the digital payments space. Meanwhile, fintech companies like Paytm, PhonePe and Razorpay are leading the charge in digital payments, offering innovative solutions that enhance accessibility and convenience. This competitive landscape requires payments banks to continuously innovate and differentiate their offerings to retain customers and maintain market share.

Regulatory changes: The regulatory environment for digital payments and financial services is evolving rapidly. New regulations could impose additional compliance costs or restrict certain lucrative operations, impacting profitability. For instance, the RBIs increased oversight and compliance requirements for fintech companies add complexity to their operations. Payments banks must stay agile and adapt quickly to these regulatory changes to remain competitive.

Cyber security risks: As digital transactions increase, so does the risk of cyber threats leading to frauds and the_s. Ensuring robust security measures and gaining customer trust in the safety of their transactions is critical but also costly. With the rise of digital payments, cyber security threats are becoming more sophisticated, necessitating significant investments in security infrastructure to protect customer data and maintain trust. Economic downturns: The fintech sector is vulnerable to economic downturns, as reflected in the decline in equity funding during such periods. This financial instability can affect investments in new technologies and marketing efforts, impacting growth and innovation.

Market saturation: With the rapid expansion of digital payment solutions and services, there is a risk of market saturation. Payments banks must continuously innovate and differentiate their offerings to stay ahead in the market. This involves leveraging emerging technologies like AI and blockchain to enhance customer experience and provide personalized financial solutions. Expanding into new markets, such as cross-border payments and cloud-based infrastructure, can help mitigate the risk of saturation.

(Source: PwC report, Mordor Intelligence)

Business model

Fino Payments Bank, established on April 4, 2017, leverages a robust financial and distribution network backed by prominent investors including ICICI Group, Bharat Petroleum (BPCL), Blackstone, and IFC. With a strong technological foundation, the Bank aims to economically integrate the underserved population through accessible banking services. By adopting a technology-led asset light driven commission-based transaction model, Fino Payments Bank reduced costs, enhanced customer convenience, and improved services, particularly in rural areas, moving away from traditional brick-and-mortar structures.

The Banks technology-first approach allowed it to create a unique physical and technological infrastructure, marking one of the earliest implementations of a phygital model in India. This model combines physical and digital elements to provide seamless banking experiences. By focusing on technology, the Bank was able to reach remote areas more e_iciently than traditional banks, which were still expanding their physical presence.

The Banks asset-light business model relies heavily on merchants acting as its representatives. These merchants fulfil the Banking and financial needs of their communities, reducing the need for extensive physical infrastructure. At the close of FY25, this network comprised nearly 19 lakh merchants, indicating rapid growth and expansion.

While bank account penetration in India is comprehensive, the Bank recognizes that the more significant opportunity lies in encouraging daily banking activities among its customer segments. This is encapsulated in its slogan, HarDinFino The data shows that simply opening a bank account does not lead to regular banking behaviour among the masses. Therefore, financial institutions need to customize their products and services to cater to these segments.

The Bank has taken the initiative to make financial services accessible and affordable by customizing its products and services. Along with its extensive merchant network, the Bank leverages improved internet connectivity and increased smartphone usage throughout the country to reach last-mile customers e_iciently. With a broader range of products, the Bank can effectively cater to the diverse needs of its customers. Under its Fino 2.0 initiative, the Bank launched the FinoPay mobile app-based digital savings account. This offers customers a smooth, paperless signup process complete with a personalized debit card and an instant upgrade option via Video KYC. The subscription model eliminates minimum balance maintenance charges, making it more appealing to customers. By the close of FY25, around 5.8 lakh customers had opened their savings accounts through this platform in just over two years of its introduction.

The Bank recently introduced a new variant of its savings account product called Gullak with a minimum balance requirement. The product is aimed at a customer segment with higher disposable income than its traditional base. This strategic move helps the Bank tap into a more a_luent market while maintaining its commitment to financial inclusion. To strengthen its digital presence and improve customer engagement, the Bank introduced several initiatives in FY25. These included launching a new website to increase tra_ic, extending the FinoPay app to the iOS platform in addition to Android, and implementing a rewards program to increase mobile app usage. A range of UPI services were introduced including UPI Lite, UPI Credit Card and

UPI Circle to cater to the growing smartphone and UPI using customer segment.

Further, the FinoPay mobile app enables more than 100 services that enhance customer experience and transaction speed through intuitive user interface (UI), user experience (UX) and optimized backend services. The Bank also integrated more than 15 fintech partners into its digital payment ecosystem, foraying into Banking as a Service (BAAS) offerings. These partners use the Banks UPI platform to offer payment services to their merchants, resulting in incremental transactions and contributing to the Banks revenue.

The Banks business model, which emphasizes Distribution-Technology-Partnerships (DTP), plays a crucial role in mitigating risks. Over recent years, the Bank has successfully built a strong brand identity, facilitating easy recognition and preference within the ecosystem. By enhancing the merchants role as a local banker and promoting the Banks motto of #FikarNot, the Bank actively fosters a preference for its brand, ensuring customer loyalty and trust.

Product wise performance

CASA: Fino Payments Banks commitment to customer ownership is deeply rooted in this critical business area. The Hatho Hath Debit Card and Bharosa product offerings, accessible at local Fino merchant points are key to achieving this objective. Our involvement in government schemes like MNREGA also boosts our attractiveness to customers, positioning us as a preferred choice.

In FY25, Fino Payments Bank opened approximately 33.3 lakh new accounts, bringing the total accounts to around 143.0 lakh. Revenue from account renewals was H189.6 crore and from new CASA subscriptions at H104.1 crore.

Our consistent focus on sourcing Current and Savings Accounts (CASA) and prioritizing the acquisition of high-quality customers, many of whom utilize UPI for transactions, has significantly boosted our subscription revenues. This includes the renewal of bank accounts, which fosters ongoing relationships with the Bank. The strategic deployment of advanced artificial intelligence (AI) and machine learning (ML) ensemble models have been instrumental in enhancing renewal rates. Most notably, our investment in acquiring high-quality customers has yielded substantial returns, underscoring the effectiveness of our customer acquisition strategy.

Fino Payments Bank launched its Digital Savings Account in December 2022, successfully opening over 5.8 accounts by the end of FY25. The success of the digital savings account reflects the evolving profile of Fino Banks customers, who are increasingly embracing digital banking solutions.

As of the latest updates, Fino Bank continues to expand its digital offerings, targeting young millennials and enhancing its direct-to-customer (D2C) channel through the FinoPay app. This strategic focus on digital growth aligns with Indias rapidly digitalizing economy and is expected to further boost the Banks customer base and revenue streams.

Micro ATMs and AePS: Fino Payments Bank plays a pivotal role in providing access to cash withdrawals, a fundamental banking requirement, through its Micro ATMs and Aadhaar Enabled Payment System (AePS). Currently, the Bank offers this service in 97% of the countrys pin codes, offen marking the first interaction customers have with Finos services. This extensive reach underscores the Banks commitment to financial inclusion, particularly in rural and semi-urban areas.

Merchants are required to pay an on-boarding fee that strengthens their long-term relationship with the Bank. This fee-based model not only enhances merchant engagement but also positively impacts the Banks Profit and Loss Statement. As of FY25, Fino has deployed around 19 lakh banking points, including Micro ATMs and AePS-enabled devices, to ensure seamless access to cash and other banking services.

Despite the growing adoption of digital payment platforms like UPI, which has led to a gradual decline in transaction volumes through Micro ATMs, Fino Payments Bank has maintained consistent take rates. In FY25, the Bank facilitated 287.8 crore UPI transactions, reflecting the increasing shi_ toward digital payments while continuing to support cash-based transactions for underserved segments.

The deployment of advanced technology and a robust merchant network has helped Fino sustain its competitive edge, even amid rising competition. The banks focus on balancing its physical and digital channels ensures it remains a key player in Indias evolving payments ecosystem. Looking ahead, Fino aims to further leverage its network and explore new opportunities in UPI-based B2B transactions and customer engagement strategies.

Domestic Money Transfer (DMT): Fino Payments Bank introduced its DMT product in 2017, laying the foundation for its initial distribution network, particularly focusing on key remittance corridors such as South India and Gujarat to Bihar. This service has been instrumental in catering to the needs of migrant workers and daily wage earners, enabling seamless fund transfers across the country.

Cash Management Services (CMS): Fino Payments Banks CMS segment has evolved into a crucial component of its business model, leveraging strategic partnerships to ensure widespread cash availability across the Banks ecosystem. This service facilitates consumer withdrawals and supports the Banks extensive network of banking points.

The Bank collaborated with 230 leading companies in India across sectors like NBFC, e-commerce, and logistics, helping them manage their cash e_iciently. This strategy exemplifies an effective ecosystem play that benefits partners, merchant network, and consumers, creating win-win outcomes.

Margins remained at 35%, allowing CMS to generate substantial net revenue. This was crucial as it maintained the momentum of the ecosystem. Additionally, the Bank provided services on behalf of other banks, which accounted for 8% of our total revenue.

Digital Payment Service (DPS): In FY25, Fino Payments Bank aggressively expanded its digital business, with a focus on enhancing UPI-based transactions. The Bank has reported a significant surge in its digital business, which now accounts for 21% of its revenue in FY25, up from 6% in the same period last year. This growth is driven by the Banks strategic investments in technology and its robust digital ecosystem.

Outlook

The Banks revenue increased by 24.9% year-on-year, reaching H1,847.1 Crore in FY25, supported by a 28.6% increase in the total transaction throughput value to H4,61,026.5 Crore during the year under review. Digital transactions significantly contributed to this growth, surging by 70.1% year-on-year and accounting for nearly 48.9% of the total throughput in FY25. Excluding digital transactions, the overall throughput grew by 4.3% year-on-year. In FY25, the Bank processed 337.9 crore transactions, a 60.1% increase from FY24. More than 33 lakh Fino Bank current and savings accounts were opened during the year, nearly 5% more than the previous year. Merchant-enabled banking points reached almost 19 lakh as of March 31, 2025, reflecting an 8.7% year-on-year increase.

The fastest-growing segments in FY25 were CASA, Digital Payment Services and CMS, which together represented 59% of the total revenue. Within CASA, combined revenue from subscription and renewals grew by 32.4% year-on-year, while the renewal business alone expanded by an impressive 48.4%. The CMS segment saw a 23.6% year-on-year increase in throughput.

Looking ahead to FY26, the company anticipates continued growth in the CASA, Digital Payment Services and CMS segments. The other mature businesses like DMT, Micro-ATM, and AEPS are expected to maintain their growth momentum. Across the blended portfolio, we project growth rates of approximately 20-25%. Net revenue margins are expected to remain stable within the current range.

Key financial ratios

Particulars	2024-25	2023-24
EBITDA/Turnover (%)	12.7%	12.9%
(before exceptional items)
Return on equity ROE (%)	13.3%	14.4%
Book value/share (H)	89.7	77.3
Earnings per share (H)	11.1	10.4
Operating profit margin (%)	5.9%	5.9%
Net profit margin (%)	5.0%	5.8%
Debt-equity ratio	1.12	1.11

Risk and Mitigation

Fino Payments Bank operates on a robust technological framework that simplifies banking for merchants and seamlessly integrates various banking devices into its mobile application. This innovative system has revolutionized banking by enabling even customers in the remotest areas to quickly open accounts, withdraw cash, and perform other transactions.

The bank risk management framework is structured to address key risks typically faced by financial institutions, including liquidity risk, interest rate risk, operational risk, cash management risk, information security, cyber risk, and reputational risk. These risks are meticulously evaluated and overseen by executive-level committees before being presented to the Audit Committee, the Risk and Asset Liability Management (RALM) Committee, and the IT Strategy Committee, which supervises IT security and cyber risks. Key risk indicators are used to monitor exceptions, deviations, losses, and other critical metrics, ensuring a proactive approach to safeguarding the Banks operations and reputation.

Risks	Description	Mitigation
Technology risk	Technologys dynamic nature poses a significant challenge, as todays benefits can quickly become outdated. With multiple integrations and multiple moving parts required for a successful transaction, technological risks can severely impact the Banks daily operations, making them a constant threat.	The Bank has implemented a FRM system to monitor transactions and detect irregularities. This proactive approach enables the Bank to swi_ly take corrective measures, such as modifying applications or imposing transaction limits, to mitigate potential risks and ensure seamless operations.
Cyber Security risk	The Banks digital division is exposed to various cyber threats, including viruses and malware, making the organization vulnerable to potential attacks and data breaches.	To safeguard against vulnerabilities, the Bank has implemented a multi-layered security framework. This includes protocols for secure data transmission, measures to protect data confidentiality, and prevent leakage. These robust security controls ensure the integrity and confidentiality of sensitive information. The Bank has also established stringent internal processes and policies, featuring built-in checks and balances to prevent fraudulent activities, misappropriation, the_, and embezzlement. In the event of exceptions, prompt action is taken to recover losses, ensuring minimal disruption to operations. In addition to these measures, the Bank prioritizes regulatory compliance, ensuring timely reporting and updates to relevant committees, including the operational risk management committee and RALM committee. The Banks investment in advanced analytics and model building has significantly enhanced its ability to detect fraudulent transactions and aberrations. This enables the Bank to initiate corrective actions promptly, minimizing potential risks and protecting its assets.

 

Regulatory risk	As a payments bank, we are subject to a complex framework of regulations, laws, and standards. Strict adherence to these requirements is crucial, as non-compliance could lead to severe consequences, including reputational damage and loss of customer trust, ultimately resulting in a decline in customer base.	The Bank has established a dedicated compliance team that continuously monitors relevant regulatory requirements, ensuring timely identification and mitigation of potential risks. This team periodically presents its findings to the board, providing assurance on the Banks compliance status. As a payments bank, we are subject to stringent regulatory requirements and prudential norms, including CRR, SLR, DDB, TNW, and CAR, among others. We closely follow and monitor these requirements on an ongoing basis, providing regular compliance updates to the board and executive-level committees. The Bank also manages its financial outsourced vendors in accordance with regulatory guidelines, as outlined in our outsourcing policy. The outsourcing committee periodically reviews these arrangements in a structured manner, providing updates to the RALM Committee. All new engagements or renewals of existing arrangements require approval from the outsourcing committee, ensuring rigorous oversight and control. This comprehensive approach to compliance and outsourcing management enables the Bank to maintain the highest standards of regulatory adherence, mitigating potential risks and ensuring the trust of our customers and stakeholders.
Competition risk	The Bank operates in a highly competitive landscape, where customers and merchants are presented with a multitude of choices, making it essential for the Bank to differentiate itself and deliver exceptional services to maintain a competitive edge.	To sustain its market leadership, the Bank is committed to continuous innovation, regularly enhancing its platform and delivering personalized services that meet the evolving needs and expectations of its customers and merchants.
Operational risk	As a payments bank, we are accountable for managing cash within our controlled environment, encompassing branches and CSPs. Conversely, the responsibility of managing cash outside the Banks purview, including merchant BCs, distributors, CMS, and other external channels, lies with the respective merchants and distributors.	The Bank has established robust internal controls, embedding checks and balances within its policies and processes to prevent and detect fraudulent activities, misappropriation, the_, embezzlement, and other financial crimes. In the event of exceptions, prompt action is taken to recover losses, and the Bank ensures timely regulatory reporting, as well as updates to the Operational Risk Management Committee and the RALM Committee, guaranteeing transparency and accountability.

Internal control systems

The Bank adheres to all applicable local regulatory standards to ensure the effective and e_icient management of its business. It places great importance on establishing a strong internal control system as a cornerstone of effective corporate governance. The Bank has implemented internal controls that are appropriate for the size and nature of its operations. These controls are continuously monitored and updated as necessary to safeguard against loss or unauthorized use of assets. The Bank has also established an audit committee, which considers all internal factors and recommends corrective action when needed.

Human resource

The Bank recognizes its employees as its most valuable asset, fundamental to its success and future growth. To attract and retain top talent, the Banks HR philosophy focuses on creating a fulfilling, inclusive, and supportive work environment that emphasizes professional development. This approach prioritizes diversity, equity, and inclusion, fostering a culture where employees can thrive.

To achieve this goal, the Bank offers competitive remuneration packages and implements best-in-class hiring, training, motivation, and performance assessment procedures. As a result, the Bank has maintained an attrition rate significantly below the industry average. As of March 31, 2025, the total number of employees in the Company was 2,769, demonstrating the Banks commitment to investing and retaining talent.

Cautionary statement

Statement in the Management Discussion and Analysis describing the Bank objectives, projections, expectations and estimates regarding future performance may be ‘forward-looking statements and are based on the currently available information. The management believes these to be true to the best of its knowledge at the time of preparation of this report. However, these statements are subject to certain future events and uncertainties, which could cause actual results to differ materially from those, which may be indicated in such statements.