11 banks come together to launch India's first blockchain-linked funding for SMEs
China’s biggest banks, including ICBC as well as CCB, are reportedly already using blockchain platforms to streamline the sale of their products.
To tackle the problems of bad debts and defaulters, 11 banks including ICICI Bank, HDFC Bank, Axis and Yes Bank have decided to come together and launch India’s first blockchain-linked funding initiative for small and medium enterprises (SMEs).
The others banks include Standard Chartered, Kotak Mahindra, RBL and the South Indian Bank, while the State Bank of India, Bank of Baroda and IndusInd Bank will be participating as outside members, say media reports.
Also read: ICICI Bank focusing on Blockchain for KYC, trade, remittances, says tech head
The meetings among the participating lenders will be organised under a consortium called the Blockchain Infrastructure Company (BIC). This move is expected to allow Indian lenders and banks to make judicious decisions through transparently accessing public data. Media reports also suggest that the system will remove information asymmetry between large corporates and SME lenders.
However, this isn’t a first.
In May 2018, Infosys, along with seven Indian banks, set up the India Trade Connect, a blockchain-based trade network with a similar aim - to increase transparency, and better manage risks in trade finance operations, while cutting time to deliver supply-chain financing.
During the first phase, the banks are expected to set up a live network for supply-chain vendors from across the country to register themselves and digitise their records.
Speaking to the media, Abhijeet Singh, Head of Business Technology of ICICI Bank, said,
“The idea of having such an organisation 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.”
Globally, China’s biggest banks, including the Industrial and Commercial Bank of China (ICBC) as well as China Construction Bank Corporation (CCB), have reportedly been using blockchain platforms to streamline the sale of their products.
This funding network will also help reduce costs, since players will not just benefit from collective knowledge but also create a common catchment area for credit history, bringing SMEs to a formal economy.
Also read: Soon, you could say goodbye to your telco and switch to a blockchain-powered phone