Neobanking Startup Jupiter Explores Stake In SBM Bank India

SUMMARY

Jupiter is in talks to acquire a 5% to 9.9% stake in SBM Bank India for an undisclosed amount

The deal has not been sealed yet and the two parties will also need RBI’s nod for the transaction to be completed

This comes at a time when several Indian fintech startups are making a beeline to invest in banks after the RBI put restrictions on licensing conditions for non-compliance

Neobanking startup Jupiter, which counts Tiger Global, Peak XV, and Matrix Partners among its backers, is the latest in the string of fintech startups evaluating an investment in a bank.

The Bengaluru-based startup is in early discussions to acquire a 5% to 9.9% stake in SBM Bank India, a subsidiary of State Bank of Mauritius, for an undisclosed amount, TechCrunch reported, citing sources.

Jupiter founder and chief executive officer Jitendra Gupta declined to answer Inc42 queries, saying he does not “comment on market rumours”.

It is pertinent to note that the deal with SBM Bank India has not been sealed yet and the two parties will also need to obtain approval from the Reserve Bank of India for the transaction to be completed.

Founded in 2019 by serial entrepreneur Jitendra Gupta, Jupiter offers a range of financial services, including debit cards, SIPs, mutual funds, personalised savings options, expense management, and UPI payments.

In June, the startup secured a prepaid payments instrument licence from RBI to provide digital wallets for UPI payments, fund transfers and bill payments.

The development comes at a time when several Indian fintech startups, along with VC firms and private equity firms, are making a beeline to invest in banks after RBI put restrictions on licensing conditions for non-compliance.

Last year, reports surfaced that investech unicorn Zerodha, PE firm Multiples, and Premji Invest were in talks to acquire a stake in Nainital Bank, a subsidiary of Bank of Baroda.

Lightspeed India Venture Partners and Elevation Capital were also said to be evaluating an investment in Shivalik Small Finance Bank.

These companies are rushing to forge ties with lenders as banking licences are still a rarity in the country. Only three Indian fintech startups — Paytm, BharatPe and slice — have banking permits.

While the jury is still out on how a banking licence will serve fintech startups, it could help them cut cost acquisition costs. However, India’s banking regulator has been intensifying its crackdown on the fintech sector even for minor licences such as NBFCs and peer-to-peer lending services.

The RBI’s scrutiny stems from its findings that several fintech firms had been lax in following customer due diligence. The sector was in for a rude awakening in January when the regulator ordered Paytm to wind down its banking unit. A month later, RBI also directed Visa to stop all B2B card payments via third party fintech firms.