Indian fintech startup Slice has completed its merger with North East Small Finance Bank, marking a rare instance of a startup successfully entering India’s tightly regulated banking sector.
The merger, first proposed last year, transforms the Bengaluru-based startup into a banking entity, following months of regulatory scrutiny that has reshaped India’s fintech landscape.
Slice, which previously gained prominence by issuing credit card-like products, will maintain its existing digital payment and lending services while expanding into traditional banking offerings including savings accounts and investment products, according to an email sent to customers on Sunday.
Banking licenses have proved elusive in India, where the central bank has rejected most applications in recent years. The Reserve Bank of India’s wariness stems from its experience with failed banks in the 1990s and governance lapses at Yes Bank and PMC Bank in the past decade.
While India has produced dozens of fintech unicorns, most must partner with traditional banks to offer basic services, making them vulnerable to regulatory changes and partner banks’ shifting priorities. This would explain why so many startups and venture firms are aggressively scrambling for a bank play in India, as TechCrunch has previously reported. Fintech Jupiter is in advanced stages of talks to acquire a stake in the India unit of SBM Bank, TechCrunch recently reported.
The bank merger gives Slice — which counts Tiger Global, Insight Partners and Blume Ventures among its backers — access to capital at lower cost and direct control over its lending operations. It can also allow Slice to launch and iterate products faster. Slice was valued at around $1.5 billion at the time of merger announcement last year.
“For over a year, the teams at Slice and NESFB have worked tirelessly to make this merger a reality,” said Rajan Bajaj, founder and chief executive of Slice, in a statement. “Today, we’re thrilled to be at the starting line of building India’s most loved bank.”
NESFB, established in 2016 as a subsidiary of RGVN Microfinance, has focused on serving customers in India’s northeastern region and counts Pi Ventures, Bajaj Group, and SIDBI Venture Capital among its investors.