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Indian fintech startup Slice has completed its merger with North East Small Finance Bank, marking a rare example of a startup successfully entering the tightly regulated Indian banking sector.
The merger, which was first proposed last year, turns the Bengaluru-based startup into a banking entity, following months of regulatory scrutiny that has reshaped India’s fintech landscape.
Slice, which previously gained popularity by issuing credit card-like products, will maintain its existing digital payment and lending services while expanding into traditional banking offerings including savings accounts and investment products, according to an email sent to customers on Sunday.
Banking licenses have proven elusive in India, with the central bank rejecting most applications in recent years. The RBI’s caution stems from its experience with failed banks in the 1990s and management lapses at Yes Bank and PMC Bank in the past decade.
While India has produced dozens of fintech startups, most must collaborate with traditional banks to provide core services, making them vulnerable to regulatory changes and the shifting priorities of partner banks. This would explain why many startups and venture firms are aggressively jostling for the banking play in India, as TechCrunch previously reported. Fintech Jupiter is in advanced stages of talks to acquire a stake in SBM Bank’s Indian unit, TechCrunch recently reported.
The banking merger gives Slice — which counts Tiger Global, Insight Partners and Blume Ventures among its backers — access to capital at a lower cost and direct control of its lending operations. It can also allow Slice to launch and iterate products faster. Slice was valued at about $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,” Rajan Bajaj, founder and CEO of Slice, said in a statement. “Today, we are thrilled to be at the starting line of building India’s most popular bank.”
NESFB, which was established in 2016 as a subsidiary of RGVN Microfinance, has focused on serving clients in the northeastern region of India and counts Pi Ventures, Bajaj Group and SIDBI Venture Capital among its investors.
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