RBI Greenlights Merger Of North East Small Finance Bank With Fintech Unicorn Slice

The Reserve Bank of India has approved the merger of startup Slice and Guwahati-based North East Small Finance Bank Ltd. to ensure financial inclusion. 

The banking regulator has been conducting audits and discussions over the merger for the last 15 months, a person with direct knowledge of the matter told BQ Prime.

The two entities are awaiting final approval from the National Company Law Tribunal for the merger to be effective. Once the approval is in, Slice-owner Quadrillion Finance Pvt. and its parent Garagepreneurs Internet Pvt. will merge with North East SFB, the person quoted above said on the condition of anonymity.

Considering Slice's popularity among its user base, the small finance bank is likely to retain the brand identity, the person said.

The merger comes after the company acquired a 5% stake in the small finance bank in March.

Bengaluru-based Slice, currently valued at around Rs 11,700 crore, runs its own non-banking financial company, Quadrillion Finance Pvt., to offer credit to the Indian youth. North East Small Finance Bank, on the other hand, has 208 branches across the North Eastern states and West Bengal. The lender is estimated to be valued at around Rs 400 crore.

“We see this as an opportunity to build a highly inclusive and responsible bank, underpinned by robust risk management and strong governance,” said Rajan Bajaj, founder and chief executive officer of Slice.

A Silent Bank Rescue?

One of the 10 financiers to have received a small finance bank licence, North East Small Finance Bank has seen its balance sheet deteriorate significantly over the last two years.

Its tier-1 capital ratio has seen a significant decline from 23.26% as of March 2020 to 2.75% at the end of FY23. The bank's net worth too dropped to Rs 60 crore at the end of the last financial year, compared to Rs 365 crore in FY21. The RBI requires a minimum net worth of Rs 200 crore for small finance banks.

As of March 2023, North East Small Finance Bank had a loan book of Rs 1,908 crore, of which loans worth Rs 1,561 crore were classified as standard assets. The small finance bank held provisions worth Rs 341 crore, or 18% of the overall loan book. It had a deposit base of Rs 2,040 crore at the end of the last fiscal.

This approval from the RBI is also a tonal shift as it has so far been reluctant to extend banking licences to non-bank lenders. Last year, it had rejected a bank licence application from Chaitanya India Fin Credit Pvt. The company, owned by Sachin Bansal, had sought a universal banking licence from the regulator. In August, Bansal sold Chaitanya India Fin Credit to Ananya Birla's Svatantra Microfin for Rs 1,479 crore.

Previously, the RBI allowed Resilient Innovations Pvt., the owner of fintech unicorn Bharatpe, to buy a 49% stake in Unity Small Finance Bank. This was part of a rescue plan, where the assets and liabilities of Punjab & Maharashtra Cooperative Bank were transferred to Centrum Financial Services, which founded Unity Small Finance Bank.