15 Indian Banks Set Up Blockchain Trade Finance Consortium
As of June 17th, 2021, it has been reported that a consortium of 15 Indian Banks has set up an efficient & much-required blockchain trade finance consortium. Known as the Indian Banks’ Blockchain Infrastructure Co (IBBIC), it is initially focused on domestic Letters of Credit.
The involved banking team consists of some of the largest banks of India such as State Bank of India, ICICI, and HDFC Bank, as well as Standard Chartered.
The blockchain-backed trade finance network, IBBIC concentrates on reducing the processing time for transactions from 4-5 days to a matter of hours as well as is efficient enough to mitigate the quantity of the paperwork given, Letters of Credits are very paper-intensive. Apart from this, another major threat being faced by the trade finance industry is the possibility of fraud, especially while submitting paperwork to a variety of lenders to raise more than the shipment value. With the help of this blockchain trade finance network, it would likely be way complex to raise multiple letters of credit for the shipment of the same goods.
This advanced letter of credit solution is elevating 50 million rupees ($680,000) from each bank for a total of $10.2 million funding and it will consider the Infosys Finacle Connect solution. It's anticipated to be launched later this year.
Since the introduction of IBBIC, the Reserve Bank of India also took part in the discussions.
The complete list of consortium participants includes State Bank of India (SBI), ICICI Bank, HDFC Bank, RBL Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, Yes Bank, South Indian Bank, Federal Bank, IDFC First Bank, Bank of Baroda (BoB), Canara Bank, Indian Bank, and Standard Chartered.
It is not the first time when the blockchain has been utilized to reduce trade finance threats in India. As early as 2018, a blockchain platform was introduced by Monetago that was focused on open account trade finance. The fraud mitigation & preventive initiative was appreciated by many of India’s trade finance platforms and helps to ensure that the invoices are not being used to raise finance several times from several organizations. Apart from this, DBS and Standard Chartered also launched a blockchain trade finance platform named ‘Trade Finance Registry.’
The list of blockchain platforms does not end here. There are many other blockchain trade finance solutions, some of which have an international focus such as Contour and Komgo concentrating on Letters of credit. The notable fact here is that Standard Chartered is also the founding member of Contour. Recently, the blockchain trade finance initiative Contour has introduced a domestic network to facilitate digital letters of credit to SMEs in Bangladesh. Before this, in March 2021, Contour joined hands with ThoughtWorks to digitize trade finance in China. It is owned by eight shareholder banks – Bangkok Bank, BNP Paribas, Citi, CTBC, HSBC, ING, SEB, and Standard Chartered that enable parties to execute transactions and view data electronically.