HSBC, Reliance Industries execute first blockchain trade finance transactionThimmaya Poojary
This blockchain-enabled financial dealing has cut down time taken for such transaction from 7-10 days in a conventional route to now less than a day.
HSBC India and ING Bank Brussels have successfully executed a blockchain-enabled, live trade finance transaction jointly with Reliance Industries and Tricon Energy.
This blockchain-enabled letter of credit transaction facilitated shipment between Reliance Industries and Tricon Energy. It was an integration between electronic bill of landing provider and a blockchain-based trade finance platform, which enabled the transfer of title.
This end-to-end transaction was executed on enterprise software firm R3’s Corda blockchain platform, which is a single shared application, rather than requiring multiple isolated digital systems across various counterparties, located around the globe. The Letter of Credit (LC) was issued by ING Bank for Tricon Energy USA (importer) with HSBC India as the advising and negotiating bank for Reliance Industries, India (exporter).
Commenting on the transaction, Hitendra Dave, Head-Global Banking & Markets, HSBC India said, “The use of blockchain is a significant step towards digitising trade. It has a transformative impact on trade finance transactions and enables greater transparency and enhanced security in addition to making it simpler and faster.”
Srikanth Venkatachari, Joint Chief Financial Officer, Reliance Industries said, “We are excited to partner with HSBC on digitalisation of trade finance. This reflects our continued commitment to embrace emerging technologies and industry first initiatives. The use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant 7 to 10 days to less than a day.”
At present, buyers and sellers use paper-based LCs to underpin transactions. Physical documents are sent to each party in the transaction by post, courier or fax. While these paper documents provide certainty, the time and cost involved in processing them are deterrents for exporters and inters and impairs the pace of trade.