Indian fintech startup Slice has completed its merger with North East Small Finance Bank, marking a rare example of a startup successfully entering India’s tightly regulated banking sector.
The merger, first offered last yearis transforming the Bangalore-based startup into a banking entity, after months of regulatory scrutiny that reshaped India’s fintech landscape.
Slice, which previously made its name issuing credit card-like products, will maintain its existing digital payment and lending services while expanding its traditional banking offerings, including savings accounts and investment products, according to an email sent to customers on Sunday.
Banking licenses have proven difficult to obtain in India, where the central bank has rejected most applications in recent years. The Reserve Bank of India’s distrust stems from its experience with failed banks in the 1990s and governance failures at Yes Bank and PMC Bank over the past decade.
Although India has produced dozens of fintech unicorns, most must partner with traditional banks to offer core services, making them vulnerable to regulatory changes and the changing priorities of partner banks. This would explain why so many startups and venture capital firms are aggressively jostling for banking play in Indiaas TechCrunch previously reported. Fintech Jupiter is in advanced stages of negotiations to acquire a stake in SBM Bank’s Indian unit, TechCrunch recently reported.
The bank merger gives Slice – whose backers include Tiger Global, Insight Partners and Blume Ventures – access to lower-cost capital and direct control over its lending operations. It can also allow Slice to launch and iterate products more quickly. Slice was valued at around $1.5 billion when the merger was announced last year.
“For over a year, the teams at Slice and NESFB have worked tirelessly to make this merger a reality,” Rajan Bajaj, founder and chief executive officer of Slice, said in a statement. “Today, we are delighted to be at the starting line of building India’s most loved bank,” added Bajaj, who will take on the role of executive director of the combined entity.
NESFB, established in 2016 as a subsidiary of RGVN Microfinance, is focused on serving clients in the North East region of India and counts Pi Ventures, Bajaj Group and SIDBI Venture Capital among its investors.