India’s Slice merges with small finance bank in rare fintech deal

India's Slice merges with small finance bank in rare fintech deal

Slice and North East Small Finance Bank Merger: A Game-Changer in the Indian Fintech Landscape

Fintech

In a groundbreaking move, Indian fintech startup Slice has received approval from the Reserve Bank of India (RBI) to merge with North East Small Finance Bank. This union comes as a rare achievement in the tech and financial startup industry, as many have struggled to achieve such a feat for decades. What sets Slice apart is its immense success in offering credit card-like services, having issued over 400,000 cards in a month at its peak, surpassing any other fintech or bank. With the merger, the combined entity aims to expand its reach and cater to the unbanked population.

One of the key catalysts for this merger was Slice’s recent acquisition of a 10% stake in North East Small Finance Bank. With Slice boasting a yearly revenue of around $100 million, this merger will not only enhance the product offerings of the new entity but also accelerate innovation. However, both companies faced challenges following regulatory changes implemented by the RBI last year. These changes had a profound impact on how firms issued cards, affecting not only Slice but also its competitors like Uni and neobanks such as Jupiter and Fi.

Slice’s Founder and CEO, Rajan Bajaj, expressed his gratitude to the RBI for entrusting them with this significant responsibility. Bajaj highlighted Slice’s customer-centric approach and robust risk management as the pillars that set them apart from others. By serving a wider audience, including the often overlooked consumers, Slice aims to build a deep emotional connection with its customers.

The promising prospects of this merger have attracted notable investors, including Tiger Global, Insight Partners, Blume Ventures, and EMVC. In its latest funding round, Slice was valued at a staggering $1.5 billion, while its initial investment in North East Small Finance Bank valued it at $68 million. Notably, two investors have already expressed their intention to invest a combined sum of approximately $125 million into the merged entity.

Established in 2016 as a subsidiary of RGVN (NE) Microfinance, North East Small Finance Bank primarily serves the northeast region of India. Having received support from investors like Pi Ventures, Bajaj Group, and SIDBI Venture Capital, the bank has made significant strides in India’s changing banking landscape. This evolving landscape has witnessed increased collaboration between banks and fintech companies, with larger banks like HDFC, ICICI, and Axis embracing this trend.

Interestingly, venture capitalists are also shifting their focus towards investing in banks. In the recent past, Accel and Quona backed Shivalik Small Finance Bank, showcasing the changing dynamics in the banking sector. However, obtaining a banking license or merging with a bank remains a rarity in India due to increased regulatory oversight. The RBI has largely rejected universal bank applications in recent years, including one submitted by Flipkart’s co-founder Sachin Bansal.

In 2021, RBI issued a small finance bank license to Centrum Financial and BharatPe to address the capital-starved situation in the country. In contrast, the capital adequacy ratio of the merged entity comprising Slice and North East Small Finance Bank is significantly higher than the RBI’s mandated 15%.

The merger between Slice and North East Small Finance Bank is poised to be a game-changer in the Indian fintech landscape. With their shared vision and alignment over the past 12 months, Slice and the bank are ready to take on new challenges, explore untapped markets, and bring innovative financial services to the masses. This merger highlights the growing synergy between technology and banking in India and sets the stage for further collaborations in the future.

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