Fintech startup Slice merges with small finance bank in rare India deal
Indian fintech startup Slice is merging with North East Small Finance Bank after receiving approval from the Reserve Bank of India (RBI).
According to the Oct. 3 TechCrunch report, this is a rare feat that has eluded many tech companies and financial startups for decades. Slice previously offered credit card-like services and, at its peak, issued over 400,000 cards in a month, more than any other fintech or bank. The merger will allow the combined entity to better serve their shared mission of reaching more unbanked consumers.
The merger follows Slice — which currently has a yearly revenue of about $100 million — recently acquiring a 10% stake in North East Small Finance Bank. It should enable the new entity to expand its product offerings and accelerate innovation. The RBI implemented guidelines last year that impacted Slice, competitors like Uni and neobanks like Jupiter and Fi. The changes challenged how firms issued cards.
Slice founder and CEO Rajan Bajaj said they have worked with the bank for 12 months, allowing the board, investors and management to align on a shared vision. He commented:
“We’re grateful to the RBI for entrusting us with this immense responsibility. […] At Slice, our unyielding devotion to customers and robust risk management have set us apart. This approach allows us to serve a wider audience, including those often overlooked, while also building a deep emotional connection with our customers.”
Slice is backed by investors like Tiger Global, Insight Partners, Blume Ventures and EMVC. It was valued at $1.5 billion in its last funding round. Its first investment in the bank valued it at $68 million. At least two investors are already planning to invest about $125 million combined in the merged entity.
North East Small Finance Bank was incorporated in 2016 as a subsidiary of RGVN (NE) Microfinance. It serves northeast India and is backed by investors like Pi Ventures, Bajaj Group, and SIDBI Venture Capital. India is undergoing a pivotal banking evolution, increasing tie-ups between banks and fintechs. Larger banks like HDFC, ICICI, and Axis are also embracing this idea.
VCs are focused on investing in banks. Accel and Quona backed Shivalik Small Finance Bank last year. Obtaining a banking license or merging with a bank is still rare in India, as oversight has increased. The RBI largely rejected universal bank applications in recent years, including one by Flipkart’s Sachin Bansal.
In 2021, RBI issued a small finance bank license to Centrum Financial and BharatPe to address a capital-starved situation. In contrast, the capital adequacy ratio of the Slice-North East bank is much higher than RBI’s 15% mandate.
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