Indian fintech startup Slice said that it has completed its merger with North East Small Finance Bank, marking a rare instance of a startup successfully entering India's tightly regulated banking sector.

The merger, first proposed last year, transforms the Bengaluru-based startup into a banking entity following months of regulatory scrutiny.

Slice, which caused a stir last year with its credit-card-like products, will keep its existing digital payment and lending services but add savings accounts and investment products, the fintech startup said in a customer email Sunday.

In India, banking licenses have remained elusive, since the central bank has rejected most applications in recent years. The Reserve Bank of India's wariness springs from its experience with failed banks in the 1990s and governance lapses at Yes Bank and PMC Bank in the last decade.

India has produced dozens of fintech unicorns, yet most companies have to partner with traditional banks if they aspire to offer banking services. That means they are dependent on regulatory changes and shifts in priorities by partner banks, which may be the reasons why so many startups and venture firms are running about in search of a banking play in the country.

Another fintech, Jupiter, was reported to be in advanced talks in September to pick up a stake in the Indian subsidiary of SBM Bank.

The merger between North East Small Finance Bank and Slice grants the former capital at lower cost and lets the latter retain direct control over its lending operations. At the time of announcing this merger last year, Slice had been valued at approximately $1.5 billion; it was backed by prominent investors such as Tiger Global, Insight Partners, and Blume Ventures.

For more than a year now, the teams at Slice and NESFB have worked tirelessly to bring this merger to life. And today, he said, they are thrilled to be at the starting line of building India's most loved bank.

North East Small Finance Bank came into existence in 2016 through a subsidiary of RGVN Microfinance. It has customer bases in India's north-eastern region, as well as investors that are Pi Ventures, Bajaj Group, and SIDBI Venture Capital.