The merger could chart the course for other fintechs who seek to become banks. The small finance banking model has worked, and RBI could ill afford to see a weak SFB fail
Rajan Bajaj, Founder of Slice
This month fintech unicorn Slice surprised the banking and fintech landscape by announcing a merger of the Guwahati-based, loss-making North East Small Finance Bank (NE SFB) with itself, marking its entry in the banking ecosystem.
Fintech experts see this merger— to which the Reserve Bank of India (RBI) has given an NOC —as one that could “chart the course” for other fintechs seeking to explore banking opportunities and for regional banks, lagging in size, reach and digital expertise, to scale up.
There has been a bit of a precedent here already. Two years ago, in October 2021, the RBI gave a banking licence to Unity Small Finance Bank, formed out of the consortium of fintech BharatPe’s parent Resilient Innovations and Centrum Financial Services. BharatPe holds a 49 percent stake in Unity SFB and Centrum the majority balance 51 percent after the two partners created a rescue plan for the troubled Punjab and Maharashtra Co-operative (PMC) Bank.
Both Slice and NE SFB stand to gain equally from the merger. Slice had already picked up a 10 percent stake in NE SFB in two separate and equal tranches in 2022 and 2023. Founded by former Flipkart staffer Rajan Bajaj in 2016, Slice is backed by 82 investors, which include 64 institutional investors including Tiger Global, Insight Partners, Moore Ventures, Gunosy, Das Capital and Blume Ventures.
Slice had been growing rapidly in its first five years of operations, providing credit lines through the ‘buy now pay later’ (BNPL) type of products to India’s youth who are usually not eligible to get credit cards from banks, to meet their purchase requirements.