Indian unicorn fintech Slice is merging with North East Small Finance Bank, they said Wednesday after receiving the approval from the central bank, in an extremely rare feat that has eluded many tech giants, top financial startups and tycoons for decades.
Slice — which earlier offered credit card–like cards and at peak issued over 400,000 cards in a month, more than any other fintech or bank — said the merger with the Guwahati-headquartered bank will allow the combined entity to better serve their shared mission and reach more consumers who currently lack access to basic banking services.
The merger, which follows Slice earlier acquiring a 10% stake in the lender in recent quarters, should also enable the new entity to supercharge its product offerings and accelerate its product iterations, industry executives said.
The Reserve Bank of India clarified a range of guidelines last year that impacted scores of startups, including Slice, rival Uni, neobanks Jupiter and Fi, making sweeping changes that challenged how many firms issued cards.
Slice founder and chief executive Rajan Bajaj said the startup has been working with North East Small Finance Bank for 12 months, a timeframe that allowed the board members, investors and management to know each other and see a shared vision.
“We’re grateful to the RBI for entrusting us with this immense responsibility,” he said in a prepared statement. “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, which counts Tiger Global, Insight Partners, Blume Ventures and EMVC among its backers, was valued at about $1.5 billion in its previous funding round last year. Its first investment in North East Small Finance bank last year valued the lender at about $68 million.
At least two investors are already in talks to invest in the merged entity, committing about $125 million between them, according to another person familiar with the matter. Bajaj declined to comment beyond confirming the merger news.
“The union of Slice and NESFB is a defining moment in India’s fintech journey,” said Vikram Chachra, general partner at 8i Ventures, an early backer of Slice, in a statement. “It heralds a digital first banking revolution at a grassroots level for India’s 600 million smartphone population.”
North East Small Finance Bank, incorporated in 2016, is a subsidiary of RGVN (NE) Microfinance that serves customers in the northeastern region of the country. It counts Pi Ventures, Bajaj Group and government-backed SIDBI Venture Capital among its backers.
India, the world’s most populous nation, is undergoing a pivotal banking phase, with banks and fintech startups forging a variety of tie-ups. Federal Bank and SBM Bank India have increasingly engaged startups to boost their businesses in recent years, and larger banks like HDFC, ICICI and Axis are also embracing the idea.
VCs are increasingly focusing on investing in banks. Accel and Quona last year backed Shivalik Small Finance Bank.
Merging with a bank or obtaining a banking license continues to be rare in the South Asian market, especially as the regulator has heightened its oversight in recent quarters, even for minor licenses like those for NBFCs and expressed concern about tech giants’ growing presence in the financial services sector. (Slice has held an NBFC license for about five years.)
The central bank has largely rejected all applications for universal banks in recent years. Last year, it rejected an application by Flipkart billionaire Sachin Bansal. Bansal’s Navi eventually sold the microfinancing unit to Svatantra Microfin in August for about $178.5 million.
In 2021, the central bank issued a small finance bank license to a consortium of Centrum Financial Services and fintech BharatPe. But that license was conceptualized to address a capital-starved situation to help remove the debris of a scam-tainted small lender PMC.
In contrast, the capital adequacy ratio of the Slice–North East bank is multiple-fold higher than the 15% mandated by the central bank. Slice’s current annualized revenue is a little over $100 million, according to a person familiar with the matter.
“This alliance with Slice marks an exciting expansion of our reach and enhancement of our services. Dedicated to supporting the underserved, our collaboration is bolstered by Slice’s innovative technology and a keen emphasis on customer experience,” said Rupali Kalita, managing director and chief executive of NESFB, in a prepared statement.
“Meanwhile, we will continue to fortify the bank governance, with continuous improvements in compliance, risk management, and leadership. Together, we strive to deliver accessible and exceptional services, fostering inclusive and responsible banking for all.”