15 major Indian banks, including State Bank of India (SBI), along with ICICI Bank, Kotak Mahindra, Axis Bank, and 11 others, have joined hands to form the Indian Banks’ Blockchain Infrastructure Pvt Ltd (IBBIC) that will utilize the blockchain technology for the processing of inland letters of credit (LCs).

Letter of Credits (LCs) are letters from a bank that guarantee that a buyer will pay the seller on time, and for the correct amount. Currently, the process of issuing an LC is relatively slow and requires human intervention to prevent frauds, authenticate transactions, and balance the ledger.

This group of banks have formed a new company called the Indian Banks’ Blockchain Infrastructure Company Private Limited (IBBIC), reported Economic Times. 

These 15 banks --10 private sector banks, 4 public sector banks and a solitary foreign bank -- will each hold an equal 6.66% stake in the newly formed company.

The IBBIC will have a total capital of Rs 75 crore with each of the participatory banks having agreed to invest Rs 5 crore each in it. Other banks can also join the company as it is expected to start operations within a year with the recruitment process set to begin later this year.

The new system will be based upon Infosys’ Finnacle Connect, a licensed core banking software product from Infosys. Notably, Infosys Finacle, which is a part of Infosys' subsidiary EdgeVerve Systems, had announced that through their partnership with R3, an enterprise blockchain software company, had completed the blockchain-based trade finance application trial.

In that trial, a total of 18 banking groups joined the Finacle Trade Connect test network. The test network is a trade finance application based on blockchain technology which is available on the Corda platform of R3.

Coming back to IBBIC, the participating banks in this joint venture are: HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, Federal Bank, IDFC First Bank, ICICI Bank, Yes Bank, RBL Bank, Mahindra Ban, State Bank of India (SBI), Bank of Baroda (BoB), Indian Bank, Canara Bank and Standard Charter.

To recall, India's first financial transaction using blockchain technology was done by India unit of HSBC in November 2018 and it was for a deal involving an export by Reliance Industries to its client Tricon Energy in the US.

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