Indian fintech startup Slice said it 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.
Slice, which gained prominence by issuing credit card-like products, will maintain its existing digital payment and lending services, and expand into traditional banking with offerings like savings accounts and investment products, the startup said in an email sent to customers on Sunday.
Banking licenses have proved elusive in India, with the central bank rejecting 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.
India has produced dozens of fintech unicorns, but most companies must partner with traditional banks if they want to offer banking services — leaving them vulnerable to regulatory changes and partner banks’ shifting priorities. This may be why so many startups and venture firms are scrambling for a banking play in the country.
Jupiter, another fintech, in September was said to be in advanced talks to acquire a stake in the Indian subsidiary of SBM Bank.
Slice’s merger with North East Small Finance Bank gives the startup access to capital at lower cost and direct control over its lending operations. Slice, which counts Tiger Global, Insight Partners, and Blume Ventures among its backers, was valued at around $1.5 billion at the time of the 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 CEO of Slice, in a statement. “Today, we’re thrilled to be at the starting line of building India’s most loved bank,” he added.
North East Small Finance Bank, established in 2016 as a subsidiary of RGVN Microfinance, focuses on serving customers in India’s northeastern region, and counts Pi Ventures, Bajaj Group, and SIDBI Venture Capital among its investors.