In order to improve transparency and security in supply-chain finance 11 Indian banks are going to establish a live network to bring a drastic change to lending practices.
According to ET top banks such as ICICI Bank, Kotak Mahindra Bank, Axis Bank, HDFC Bank, RBL Bank, Yes Bank, Standard Chartered Bank and South Indian Bank. State Bank of India, IndusInd Bank and Bank of Baroda are involved in this initiative.
“The idea of having such an organisation is to remove any communication hurdle among the different banks. A blockchain network can only thrive if athe entire ecosystem is working in synergy through a single network,” said Abhijeet Singh, head of business technology at ICICI Bank to ET.
To enable this endeavour, a consortium known as the Blockchain Infrastructure Company (BIC) is mediating between the participating banks to bring this initiative to life. In the larger scheme of things this is a great development that shows how blockchain technology can improve banking systems.
“Credit penetration is low for the micro, small and medium enterprises (MSME) sector where the ticket size is generally believed to be between Rs 10 lakh and Rs 1 crore,” Viral Acharya, Deputy Governor, RBI, had said earlier this week at a gathering at IIT Bombay.
Initially participating banks will setup a live network which will enable supply-chain vendors pan-India to register and digitise their records.
“All these supply-chain players, banks, logistics partners, customs, etc have different technological platforms and technical competence... a common blockchain network harmonises the requirements and lets everyone see the flow of the trade on a single platform,” said Akhil Handa, head of fintech and new business initiatives, Bank of Baroda.
Bankers are hoping a new industry-wide blockchain-based system will help them reduce cost and deepen their credit catchment area by getting more SMEs into the formal credit system. A network promoted by the large lenders is likely to become the nodal blockchain system.
Cryptocurrency enthusiasts may feel disheartened as there's nothing that relates to the ongoing ban here. But, the very use of blockchain technology and it's rising fame and use amongst the top banks is just fantastic.
Indian government is still debating if cryptocurrencies are digital currencies or digital assets. But the tech has gained popularity amongst all areas of the industry in India.
These days every technology summit has a blockchain feature to it with many startups working in this space in the country.
Hopefully the government and the bankers will soon realise that they cannot shut out a country of 1.3b people from using cryptocurrencies. They will have to take measures to break down this hostile environment and create more opportunity for everyone.
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