In order to fight against the obstacles of bad debts and defaulters, 11 Indian banks have come to launch a blockchain-linked funding initiative for small and medium enterprises (SMEs). Notably, this is the first initiative of its kind for the country.
The banks who are spearheading the project are Kotak Mahindra Bank, ICICI and Axis Bank. Yes Bank, Standard Chartered Bank, RBL Bank, and South Indian Bank are part of the group as well. Even IndusInd Bank, State Bank of India and Bank of Baroda are participating, but as outside members for now.
Blockchain Infrastructure Company (BIC) will be the consortium under which the participating lenders will operate. Through this recent initiative, BIC is expected to allow Indian lenders and banks to make judicious decisions through transparently accessing public data.
This will also remove information disparity between large corporates and SME lenders. Latest central bank data showed that the outstanding credit of all commercial banks with the MSME sector as a percentage of the total outstanding corporate credit with banks is just 17.3%.
Commenting on the recent move, Abhijeet Singh, the head of business technology at ICICI bank said:
“The idea of having such an organization 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.”
Akhil Handa, head of fintech and new business initiatives, Bank of Baroda added:
“All these supply-chain players, banks, logistics partners, customs, etc have different technological platforms and technical competence… a common blockchain network harmonizes the requirements and lets everyone see the flow of the trade on a single platform.”
China is already ahead when it comes to implementing Blockchain technologies in the banking sector. China’s biggest banks, including the Industrial and Commercial Bank of China (ICBC) as well as China Construction Bank Corporation (CCB), are already using blockchain platforms to streamline their operations.
Although the Indian government doesn’t seem to be too crypto friendly, they seem to have embraced blockchain. Earlier this week BitcoinExchangeGuide had reported about India’s Institute of Development and Research in Banking Technology (IDRBT) releasing a blueprint for blockchain implementation on the banking sector. Prior to that, we reported a story about Telangana, a state in southern India, launching an initiative powered by blockchain to help the unbanked get a credit score.