Fintech unicorn Slice chooses 5% in North East Small Finance Bank

Fintech unicorn Slice chooses 5% in North East Small Finance Bank

Tiger Global-backed fintech company Slice has picked up a 5% stake in North East Small Finance Bank, various sources aware of the topic said, in what is possibly the first time a new-age fintech venture is investing in a bank. The investment amount currently is less than Rs 30 crore, the sources said.

The move is an indication of the growing thrust by fintech firms to partner with licensed banks in India. Sources said Slice may also explore further investments in the bank but those discussions have yet to be finalized.

An investment of up to 5% in a bank does not require approval from the Reserve Bank of India (RBI). Additional stake purchases will need the banking regulator’s clearance.

Slice, which has been exploring a potential investment in a bank for a few quarters, bought the stake in the Assam-based bank in September last year but it has not been reported before.

“There is more at play between Slice and North East Small Finance Bank which is why it’s been under the wraps thus far,” a person aware of the goings-on said.

Sources said Slice, which is focused on serving digitally savvy young customers, is exploring multiple integrations and customized offerings for its users through investment and partnership with the bank.

North East Small Finance Bank CEO Rupali Kalita did not respond to an email till press time Tuesday.

More on cards?

Slice’s move to invest in a small finance bank comes at a time when it’s been running its own non-banking financial company, or NBFC, for over four years.

It will be eligible to convert itself into a bank through a fresh license after operating the NBFC unit for five years. Last year that slice had received an in-principle prepaid payment instrument (PPI) license from the RBI.

“It would make things easier for them (Slice) to work closely with the bank and open many doors for partnerships. Essentially, it makes sense to have more stake in the bank and own the stack for its businesses. They have been very sensitive about it since it would involve the regulator’s clearance,” one of the sources added.

The Bengaluru-based startup –valued at over $1 billion – came under pressure in 2022 after the banking regulator barred prepaid cards from being loaded with credit lines. It made multiple changes in its products since then for regulatory compliance with the new guidelines.

Slice was earlier asking users to open prepaid accounts that would be linked to its cards. However, following RBI’s note, Slice unbundled payments and credit into two separate business verticals, stepping away from the practice of providing credit through PPI (or payment) cards.

Lending is still the company’s core product, though it is betting on new ones like its Unified Payments Interface (UPI) offering.

“A clarity will emerge over the coming months over the nature of partnerships between Slice and North East Small Finance Bank —on products and ownership,” one of the people mentioned earlier added, indicating further developments could be on the cards.

Paytm’s parent One 97 Communications has a payments bank license and had sought the regulator’s nod to convert itself into a small finance bank to enable it to lend directly. This was, however, done before its public market listing.

Bank operations

North East Small Finance Bank is majority owned by RGVN (North East) Microfinance Ltd which had about 84% stake as of September last year, data from business intelligence platform Tracxn showed.

RGVN Microfinance has been operating its microfinance business and the small finance bank is a wholly owned subsidiary. It was granted an in-principle banking license in September 2015 after which it started operations in October 2017, according to the bank’s website.

Regulatory documents sourced from Tofler – which tracks such filings at the Registrar of Companies (RoC) – showed it slipped into losses of Rs 123 crore in FY22 against a profit of around Rs 7 crore in FY21.

It had clocked profits of Rs 12.6 crore and Rs 36.9 crore in FY20 and FY19, respectively, Tracxn data showed. The bank reported revenue of Rs 329 crore in FY22 compared to a little over Rs 332 crore in the previous year.