Major banks in India have joined forces to launch the country’s first blockchain-linked funding for small and medium enterprises (SME).
The 11 big lenders participating in the initiative include ICICI, AXIS, HDFC, Kotak Mahindra, YES Bank, Standard Chartered, RBL, South Indian Bank, IndusInd Bank, State Bank of India and Bank of Baroda. The meetings among the participating bank are being organized by a consortium called the Blockchain Infrastructure Company (BIC).
The goal of the initiative is to transform the face of lending to default-prone small firms. The participating banks have been working together to set up a live network that cuts timeframe in supply-chain financing, making it more transparent and secure.
“The idea of having such an organization is to remove any communication hurdle among the different banks,” said Abhijeet Singh, head of business technology at ICICI Bank. “A blockchain network can only thrive if the entire ecosystem is working in synergy through a single network. The core objective of having such a ledger network is to ensure transparency in credit disbursement, especially in the underbanked section.”
The planned blockchain network will allow the banks to access public credit data and help them make their lending more judicious and less risk-based. It will also remove the information hierarchy between large corporates and SME lenders in terms of availing credit from banks. The first phase will involve the setting up of a live network for supply-chain vendors from across the country, where they would be able to register themselves and digitize their records.
To recall, India’s first financial transaction using blockchain technology was done when HSBC used blockchain tech in a deal involving an export by Reliance Industries to its client Tricon Energy in the US.
In October last year, ICICI Bank joined JP Morgan’s blockchain-based payment project called Interbank Information Network (IIN), and become the only bank from India to have joined JP Morgan’s proprietary blockchain platform.
Kerala headquartered Federal bank is also building its remittance app based on R3 Corda, an open source blockchain project by R3CEV LLC which is a distributed database technology company supported by a more than 200 firms including banks and financial institutions such as Bank of America, Merrill Lynch, HSBC, RBS and Temasek, among others.