Inside slice’s Bet To Fix A Broken Bank

The 2024 merger between slice and North East Small Finance Bank has delivered an early turnaround, with improving asset quality, a stronger balance sheet and the bank reporting its first profitable phase

The turnaround was driven by integrating slice’s proprietary underwriting, behavioural data models and in-house core banking stack with the bank’s operations

Despite improved NPAs, rising deposits and expanding income, slice SFB faces high operating costs, regulatory scrutiny and stiff competition

Added to Saved Stories in Login VIEW SAVED STORIES .inc42-toggle-item-popup { display: none; position: relative; } .toggle-item-close { text-align: end; padding: 8px 12px 0px 10px; position: absolute; right: 0; cursor: pointer; } .toggle-items-content-main { display: block; position: relative; top: 27px; left: -204px; border-radius: 12px; background: #FFF; box-shadow: 0px 4px 24px 0px rgba(100, 100, 100, 0.25); width: 435px; height: 115px; } .toggle-items-content { display: flex; align-items: baseline; justify-content: center; padding-top: 22px; } .toggle-items-content .items-content-text .h4-saved-story{ color: #000; font-size: 20px; font-style: normal; font-weight: 700; line-height: normal; text-transform: capitalize; margin: 2px 0 10px 6px; } .toggle-items-content .items-content-text .myInc42-plus-dark { width: 100px !important; } .toggle-items-content .items-content-text .myInc42-light { width: 80px !important; } .toggle-items-content .items-content-text img{ height: 22px; } .view-my-feed-btn { width: 100%; text-align: center; display: flex; justify-content: center; } .view-my-feed-btn a { width: auto !important; } .view-my-feed-btn button { border-radius: 4px; background: linear-gradient(180deg, #DA1B4D 0%, #E23026 100%); color: #fff; font-size: 12px; display: inline-block !important; min-width: 162px; width: 162px !important; height: 34px !important; font-style: normal; font-weight: 700; line-height: normal; padding: 10px; cursor: pointer; } .CustomIconStyled { position: absolute; right: 180px; top: -80px; } .SubDropdownModelShare .sub-arrow-icon { width: 76px; height: 80px; position: relative; overflow: hidden; box-shadow: none; } @media (max-width:767px) { .toggle-items-content .items-content-text .h4-saved-story{ margin: 4px 0 10px 6px; font-size: 18px; } .toggle-items-content { align-items: center; } }

When slice completed its merger with the troubled North East Small Finance Bank (NESFB) on October 27, 2024, amid RBI’s clampdown on co-branded credit cards, many saw it as a gamble that was doomed to fail. One year, two months, and four days later, as of December 31, 2025, the Rajan Bajaj-led fintech unicorn, and now a small finance bank (SFB), had already turned it all around.   

NESFB, which traces its origins to Rashtriya Gramin Vikas Nidhi — a microfinance society founded in 1995 — had a gross non-performing asset (NPA) of 11.89% in the financial year 2023-24 (FY24). The small finance bank (SFB) had a net worth of around ₹61 Cr and a return on assets of -7.01% when the Tiger Global-backed co-branded credit card startup bought it  

slice, founded in 2016, was also in a regulatory quagmire due to the apex bank’s crackdown on BNPL startups. Its loss for the year (FY24) stood at ₹152.7 Cr against a top line of INR 251 Cr.

Tables turned, and slice, now a small finance bank, reported its first profitable phase, as of December 31, 2025. Its net profit was ₹27.97 Cr in the first nine months of FY26.

Across fintech and consumer tech spaces, it is a rare sight for startups to acquire legacy companies, and such sightings are even rarer in the country’s financial services sector, due to the industry’s complex regulatory architecture.  

Not to mention, almost every fintech founder aspires to run a bank, but it is as scarce as hen’s teeth. Even Navi, a fintech unicorn founded by the Flipkart cofounder Sachin Bansal, failed to secure a universal banking licence directly from the RBI. The central bank rejected Navi’s application in 2022, highlighting the regulator’s cautious approach to granting new banking licences.

slice’s journey is also very different from that of BharatPe, which has Unity Small Finance Bank in its kitty. Formed in 2021 after Centrum Financial Services absorbed the distressed Punjab and Maharashtra Cooperative Bank, the former brought BharatPe on board as a 49% co-investor. This constitutes a partnership rather than a merger. 

BharatPe’s fintech operations and the bank remain distinct entities. 

BharatPe also faces a looming regulatory obligation. Resilient Innovations, the parent entity for BharatPe, is required to reduce its stake in Unity SFB from 49% to 10% by 2029. 

Against this backdrop, let’s take a deeper look at how the BNPL startup is now living out what many could only dream of. 

Today, many engineers may aspire to build their own fintech ventures, but how many desire to buy a distressed bank? Bajaj, an IIT Bombay alumnus, dared. 

With the merger, he became the largest individual shareholder of a licensed scheduled commercial bank and its de facto architect.

According to sectoral experts, a smart move would have been to secure the banking licence and layer a fintech product atop, keeping the messy banking operations at arm’s length. 

But, Bajaj did the opposite. He merged everything, operations, capital, technology, people and liability, and set about rebuilding from the core.

In February 2026, Acuité Ratings assigned slice Small Finance Bank a BBB+ (Stable) rating on its proposed tier II bonds — a formal credit market validation that the bank is stable enough to raise subordinated debt.

While there is a visible turnaround in both slice and NESFB’s operations and balance sheet, it is also replete with challenges like persistent cost pressures, regulatory pressures and a nascent profitability track record. 

slice’s banking move was not incidental. Over the years, the company built proprietary credit underwriting infrastructure while partnering with NBFCs and banks to extend credit lines to young, new-to-credit, digital-savvy consumers. 

It developed UPI-integrated payment products, real-time behavioural scoring systems and a consumer base with demonstrated repayment behaviour. What it lacked was scale, which was constrained by funding costs, capital requirements and the structural limitations of the NBFC partnership model.

The NESFB merger route offered a solution. 

In mid-2022, the tightening of the RBI’s regulatory noose on the BNPL space, effectively banning NBFCs from loading prepaid payment instruments (PPIs), such as wallets and prepaid cards, with credit lines caused a major disruption.  

While many BNPL startups shut down, others, including Simpl, LazyPay, Unicards, pivoted. slice, on the other hand, had its eyes on NESFB. 

Incorporated in July 2016 and operational as a small finance bank since October 2017, NESFB  held a scheduled commercial bank licence and an existing deposit franchise — thin and stressed, but real. 

The RBI issued a no-objection certificate (NOC) for the merger in October 2023, enabling the transfer of all assets and liabilities of the slice group, including Garagepreneurs Internet, Quadrillion Finance, and Intergalactory Foundry, to the bank. 

The deal was structured not as an acquisition of convenience but as a full operational integration. This mattered for what was to come next.

Quick Commerce & India’s Micro Festival Boom

The New Garage: OpenClaw And India’s DIY AI Agent Boom...

Travel Platforms Stranded In The Fog Of War

Bajaj became the executive director and made Satish Kumar Kalra, the former senior executive of Andhra Bank, the CEO of the merged entity. On February 16, 2026, the RBI approved the appointment of Bajaj as the CEO of Slice Small Finance Bank. 

Orchestrating The Turnaround 

The first and most consequential decision post-merger was deliberate restraint. As per insiders, the priority of the merged entity was not growth in the loan book but credit discipline. Portfolios were recalibrated, pricing was aligned to risk, collections processes were strengthened, and monitoring shifted from reactive to proactive. 

“The top priority was to fix the core of the balance sheet,” one of the sources said.

Therefore, the merged entity undertook a complete overhaul of the bank’s lending infrastructure. Instead of relying solely on traditional bureau-based lending models, slice deployed a proprietary underwriting stack that used behavioural data, real-time signals and digital transaction trails.

“The lending framework incorporated multiple data inputs, including UPI transactions, merchant payments data and behavioural indicators to assess creditworthiness, particularly for customers who are new to formal credit systems,” the sources said.

They added that slice changed the underwriting framework of NESFB using its own risk infrastructure: real-time behavioural scoring, cash flow-led analysis, UPI and merchant data signals, fraud intelligence layers and centralised risk decisioning. This replaced reliance on traditional bureau-based lending models alone.

The impact was a gradual improvement in asset quality and a stabilisation of the bank’s balance sheet.

Gross NPA fell from 11.89% in FY24 to 6.25% in FY25. Net NPA declined from 8.36% to 3.98% in 9M FY26. Net interest margin expanded from 4.49% in FY24 to 14.43% in FY25, reflecting better yield management and deposit mix discipline. 

Operating income more than tripled from ₹127.43 Cr to ₹403.27 Cr in FY25, and nearly doubled again to ₹738.91 Cr in the first nine months of FY26. Net worth expanded from ₹60.91 Cr to ₹845.34 Cr in 9M FY26, aided by capital infusion and internal accruals.

Rather than pursuing aggressive branch or book expansion, the management focussed on improving capital adequacy and building a stable deposit base. 

Deposits scaled from ₹1,519.57 Cr in FY24 to ₹4,349.08 Cr in 9M FY26. Advances grew from ₹802.43 Cr to ₹4,158.66 Cr over the same period.

Building The Bank’s Digital Core

A second pillar of the turnaround involved technology infrastructure. Traditional banks often rely on legacy core banking systems provided by external vendors. These systems can be expensive to modify and slow to evolve. slice took a different route by building its own microservices-based core banking system.

According to company sources, the in-house system integrates directly with underwriting engines, fraud monitoring systems and customer-facing products. This architecture allows teams to experiment with new features, adjust pricing or redesign customer journeys.

The idea of banks owning their core technology infrastructure is gaining traction globally, particularly as digital banking accelerates. For a bank attempting a rapid turnaround, such a tech stack can make a significant difference.

In slice’s case, this meant faster iteration cycles and tighter integration between engineering, risk and product teams.

Industry observers say such architectures also allow fintech-led banks to operate with lower tech costs over time, though the initial investment can be significant.

“slice’s in-house engineering, product and risk teams operate in integrated loops. AI and GPT-powered tools have been deployed across underwriting analysis, customer support and compliance workflows,” one industry insider added. 

The SFB’s digital makeover also meant no aggressive branch expansion. Traditional banks rely heavily on physical branches to acquire and serve customers. But this can be an expensive affair, particularly for small finance banks with limited scale.

slice prioritised digital distribution. Through its mobile platform, the bank allows customers to open accounts, access payments and apply for credit directly. Physical branches continue to exist but are increasingly positioned as assisted digital centres rather than full-service branches.

This approach has helped lower customer acquisition and servicing costs while maintaining local presence.

Despite charting a turnaround, slice’s audacious bet on India’s thriving digital banking ecosystem is also rife with challenges. 

Bajaj is running a small finance bank at a time when one of its listed peers, Fino Payments Bank, is facing a unique challenge. 

The arrest of its cofounder, Rishi Gupta, has sent ripples across India’s digital banking and fintech ecosystem, triggering anxiety among founders and investors about how quickly regulatory or legal scrutiny can escalate for leaders of financial institutions, destabilise operations of the company and erode its net worth. The episode is a cautionary tale for fintech-turned-banks.

Once a company holds a banking licence, expectations around governance, compliance and accountability rise by fathoms.

For Bajaj, now steering slice Small Finance Bank, this means maintaining a balance between innovation and institutional discipline. 

Beyond regulatory optics, Bajaj’s immediate challenge will be operational.

According to a note by Acuite, slice SFB’s costs-to-income ratio is still significantly higher than the industry average, and any future business ratings will depend on how quickly the bank cuts its losses. 

The cost-to-income ratio, while improving, remains elevated at 83.43% in 9M FY26, against peer levels of 60-65% for established SFBs. 

Operating expenses rose sharply from ₹173.98 Cr in FY25 to ₹616.47 Cr in 9M FY26, reflecting investments in branch expansion, technology and headcount. 

Some of this is growth investment that should generate returns over time. But, as per Acuite, the path from 83.43% to a competitive cost-to-income ratio is long, and the bank must demonstrate that operating leverage is real and not merely theoretical.

Over the longer term, the bank is also tasked with stabilising its balance sheet, demonstrating consistent profits and listing to reduce promoter shareholding.

However, beyond the numbers, there is a structural question about the institution’s competitive positioning. slice Small Finance Bank now competes in a landscape that includes AU Small Finance Bank, Equitas, Jana and Ujjivan. 

These institutions have a multi-year head start when it comes to branch networks, deposit franchises and regulatory capital track records. In that sense, slice’s turnaround story is only unfolding. While the first phase was about survival, the next phase needs to be about maturing into a robust financial institution.

Edited By Shishir Parasher

© Inc42