Eleven banks are coming together to launch India’s first blockchain-linked funding project, reports The Economic Times. The development is organized under a consortium named “The Blockchain Infrastructure Company.” Such an initiative aims to transform the funding process for small and medium enterprises (SMEs). Such a move will improve the lending facilities to small firms which are in many cases unable to repay the amount in time.
“A blockchain is a synchronized distributed ledger where data entry by any member is visible to all the stakeholders in the, but the data entered at any point is immutable,” notes PwC fintech consultant Vivek Belgavi. “It is impossible to change a blockchain entry once it has been made, making the transaction registry completely transparent and immune to frauds.”
ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Yes Bank, Standard Chartered Bank, RBL Bank, South Indian Bank, and Axis Bank are among the consortium of eleven big banks launching this project. IndusInd Bank, State Bank of India and Bank of Baroda are participating as outside members.
“The idea of having such an organization is to remove any communication hurdle among the different banks. A blockchain network can only thrive if the entire ecosystem is working in synergy through a single network,” said Abhijeet Singh, head of business technology at ICICI Bank. “The core objective of having such a ledger-network is to ensure transparency in credit disbursement, especially in the underbanked section.”
The initiative will provide lenders access to the public credit data, and this will allow them to make prudent and riskless lending. The system will also remove the information hierarchy between large corporates and SME lenders regarding availing credit from the banks.
“All these supply-chain players, banks, logistics partners, customs, etc. have different technological platforms and technical competence,” said Akhil Handa, head of fintech and new business initiatives, Bank of Baroda. “A common blockchain network harmonizes the requirements and lets everyone see the flow of the trade on a single platform.”
Bankers wish that this blockchain-based system will help them reduce cost and deepen their credit catchment area by getting more SMEs into the formal credit system, the report notes.
The initiative comes just after the news of the development of a blueprint of Blockchain technology by The Institute for Development and Research in Banking Technology (IDRBT) for the banking sector with the aim of broader adoption of the technology in various business and organizational functions.
In June last year, India’s think tank NITI Aayog had proposed a blockchain system meant for India’s public records ostensibly called IndiaChain.