Tag: blockchain technology

How Indian banks are leveraging blockchain technology, BFSI News, ET BFSI

Banking & Finance

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In a bid to foster blockchain technology for providing various financial services, banks have put in place Indian Banks’ Blockchain Infrastructure Company Private Limited (IBBIC).

The Reserve Bank of India (RBI) has informed that it has been proactive in providing guidance for development of blockchain-based application through its new regulatory sandbox environment, the government told the Rajya Sabha.

“State Bank of India (SBI) and Canara Bank are part of a company called Indian Banks’ Blockchain Infrastructure Company Private Limited for using blockchain technology for providing various financial services. SBI has informed that as a part of IBBIC development, it has initiated steps to incorporate blockchain technology in trade-related transactions,” the government said.

Further, SBI has been onboarded on a blockchain-enabled platform, for exchanging payment-related compliance queries.

Canara Bank has informed that it had formed a small technology innovation team, which is working on identifying the potential use cases best suited to banking operations, he added.

The deployment

Banks are looking to deploy the blockchain technology to solve issues in the processing of Letters of Credit (LCs), GST invoices and e-way bills.

Currently, the process of issuing an LC is relatively slow and requires human intervention to prevent frauds, authenticate transactions, and balance the ledger.

Using blockchain to issue LCs would potentially solve these issues. Even elemental fraud like the issuance of two LCs on a single invoice can be easily prevented with the help of this blockchain technology.

The move is expected to eliminate paperwork, reduce transaction processing time, and offer a secure environment. The system will be based on Infosys’ Finacle Connect, a blockchain-based platform that enables digitisation and automation of trade-related finance processes. Disbursements on domestic LCs, which used to take four to five days, can be done in four hours with the technology. The technology has already been deployed or piloted by the likes of SBI and Axis Bank at an individual level.

Who are the stakeholders of IBBIC?

Out of the 15 banks, eleven are private sector banks while four are public sector ones.

The private banks include HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, Yes Bank, RBL Bank, IDFC Bank, South Indian Bank, and Federal Bank. And, the public sector units encompass Bank of Baroda, SBI, Canara Bank, and Indian Bank.

The incorporation of IBBIC is similar to that of the National Payments Corporation of India (NPCI), which is an umbrella organization that handles critical real-time products like RuPay, UPI, and FASTag.



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ICICI, Axis and HDFC Bank pick up stake in blockchain start-up

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Private sector lenders including HDFC Bank, ICICI Bank and Axis Bank have picked up a stake in blockchain technology focussed start-up IBBIC Pvt Ltd.

In separate stock exchange filings on Tuesday, HDFC Bank and Axis Bank said they have picked up 50,000 equity shares amounting to 5.55 per cent stake in IBBIC.

HDFC Bank and Axis Bank invested ₹5 lakh each for the shares.

ICICI Bank also said it has subscribed to 49,000 fully paid-up equity shares of face value ₹10 each of IBBIC constituting 5.44 per cent of the issued and paid-up share capital. It paid ₹4.9 lakh for the shares.

IBBIC was incorporated on May 25 this year as a financial technology company with the objective of providing a platform for exploring, building, and implementing distributed ledger technology (DLT) solutions for the Indian financial services sector.

About 15 banks have come together to set up IBBIC, with an aim to expand the use of blockchain application in financial sector transactions.

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Tata Steel, HSBC execute paperless trade transaction

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For the first time ever, Tata Steel and HSBC executed a blockchain-enabled, paperless trade transaction.

The paperless trade transaction was made possible by Tata Steel’s collaboration across the spectrum over the Contour and essDOCS platforms.

Also read: Tata group to import 24 cryogenic containers to transport liquid oxygen

The live trade finance transaction involved export of steel by Tata Steel to Universal Tube & Plastic Industries, UAE.

The Letter of Credit was issued by HSBC UAE for Universal Tube & Plastic Industries, UAE (importer), with HSBC India as the advising and negotiating bank for Tata Steel, India (exporter).

Tata Steel plans to explore similar opportunities in other export markets in future.

Peeyush Gupta, VP (Steel Marketing & Sales), Tata Steel, said adoption of this platform enables a faceless yet trustworthy all-time interface for better customer experience. This initiative, executed in collaboration with HSBC, demonstrates Tata Steel’s effort to lead technology-led disruptions by challenging the status quo and reimagining the global trade set-up, he said.

Hitendra Dave, Head-Global Banking & Markets, HSBC India, said having pioneered Blockchain technology deployment in trade finance, the bank is focused on enhancing its utilisation across a wider spectrum of trade finance transactions.

The transaction is a significant step towards mass commercialisation and adoption for a transformative impact on trade finance, he added.

Contour, which has been built on blockchain technology, enables the underlying LC trade transaction to be fully digitised from the LC issuance to presentation of documents. It also enables parties to transfer, manage and present electronic Bills of Lading and supporting documents within its platform via the interface with essDOCS’ CargoDocs platform.

Also read: Tata Steel to rejig Corby tube plant in UK

Corporates can reduce the costs associated with handling paper-based documents, its reconciliation and streamline their processing flow.

It also helps to reduce the document negotiation and banking transaction cycle from weeks to a few days, thereby aiding in unlocking of working capital for businesses.

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State Bank of India joins JPMorgan’s blockchain-based payment network, BFSI News, ET BFSI

Banking & Finance

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State Bank of India has tied up with JPMorgan to use the US bank’s blockchain technology to speed up overseas transactions.

The tie up is expected to reduce SBI customers’ transaction costs and time taken for payments, sources said. Time taken to resolve cross-border payments-related inquiries can be reduced to a few hours from up to a fortnight, they said. This will help cross-border payments reach beneficiaries faster and using limited steps.

“We have undergone significant digital transformation in recent years and continue to add new technologies to create real value to daily operations,” said Venkat Nageswar, deputy MD – international banking group, SBI.

“We are excited to be the first bank in India to go live on the network and look forward to closer partnership with JP Morgan on implementation and exploring application as part of the network to better serve our clients,” he told ET.

A spokesperson said JPMorgan said it will expand its blockchain presence in India.

“We continue to actively explore how emerging technologies can enhance our clients’ experience,” said P D Singh, managing director and head – corporates and FI, JPMorgan Chase Bank, India.

The global bank’s blockchain technology — Liink — is meant for a peer-to-peer network, with financial institutions, corporates and fintech companies subscribing to it internationally. This enables users to make secure as well as peer-to-peer data transfers with greater speed and control. It also mitigates risks involved in cross-border transactions.

SBI has integrated Liink into its operations to exchange payments-related information with other financial institutions.

Globally, about 100 banks are now live on the network. Many other large local lenders, both government and private, are said to be in talks with JPMorgan on the same.

According to blockchain experts, banks around the world – including lenders from China and Africa – are taking to blockchain-based clearance systems for cross-border transactions. This is to get a first-movers’ advantage and to make such payments faster and cheaper.

“The World Bank confirmed that bank-led remittances cost an average of 10% globally, which is really high. Projects like Ripple or various bank consortia have argued that a distributed ledger (or a new blockchain) shared between banks directly removes the need for correspondent banking and can thus reinvent cross-border remittances or trade cash flows for the new age.” said Nitin Sharma, partner at Antler Global and previously the founder of Incrypt Blockchain.

“At least two Mumbai-headquartered private sector lenders and a large state-owned bank are in talks with JPMorgan,” said a banking source.

Going forward, Liink will also be able to allow participating banks to pre-validate an account even before making payments, and check message formatting for adherence to regulatory norms at beneficiary location. This process helps mitigate transaction rejection/frauds, a move that will garner more customer satisfaction.



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Fintech lobby groups ask govt to allow blockchain ecosystem grow organically, BFSI News, ET BFSI

Banking & Finance

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The Indian government should resist creating a framework to regulate blockchain for a while, said Global Impact FinTech, a grouping for 200 fintech entrepreneurs, and the Government Blockchain Association, another lobby group.

“It is recommended that the government does not create any framework for the time being and allow the ecosystem to evolve freely with the active support of the government,” the groups said in a response to the government paper on National Strategy on Blockchain.

“Such a framework, when created too early, without adequate understanding of what may be needed and when the ecosystem is not yet mature may not be successful. Creating the national framework can be done at a time when its need will be naturally apparent.”

Both organisations are in favour of letting the blockchain ecosystem grow organically, rather than the government creating one for them. The draft strategy paper by MeitY (Ministry of Electronics and Information Technology) proposes an elaborate framework of applications, services, APIs and platforms.

“It was not very clear in the proposed blockchain framework what will be the role, access and scope of various constituents. It also gave an impression that the framework may result into a scheme wherein things are more centralised (like UIDAI) than distributed, thereby defeating the principal objective,” said the lobby groups.

The government has been in favour of using blockchain as a technology but has been against cryptocurrency, which is the tokenization of the same technology. Recently, it brought a bill in the parliament that proposes to ban all “private” cryptocurrencies.

The industry sees the government both as an enabler and a customer for blockchain technology and expects sustained support for the development of the ecosystem in India.

“The government must come out more clearly in support of blockchain adoption. To understand the nuances of what may be needed, it is suggested the government becomes an active member of some blockchain ecosystems just like some countries like Canada and Estonia have done,” the lobby groups said.

They are also seeking removal of legal and regulatory challenges to the ecosystem and the creation of a government sandbox for blockchain applications.



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