Advancements in Indian Banking: Blockchain Technology Gains Momentum
In a recent development, the Indian Banks’ Digital Infrastructure Company (IBDIC) is actively exploring the integration of domestic Letter of Credit (LC) issuance on the blockchain, according to information sourced from the Indian Banks’ Association (IBA). Minister of State for Finance, Bhagwat Karad, shared this insight in a statement to the Lok Sabha on Monday.
Exploring Blockchain Use Cases
Karad conveyed that, based on information furnished by the IBA, a limited number of banks are presently employing blockchain technology on a small scale. Discussing this matter in a written response, he emphasized that the current concern of interoperability among banks utilizing such platforms does not exist. The primary purpose of IBDIC, formerly known as Indian Banks’ Blockchain Infrastructure Company (IBBIC), is to serve as a platform for the exploration, development, and implementation of digital solutions within the Indian financial services sector.
IBDIC’s Current Focus
Presently, IBDIC is dedicated to scoping the implementation of domestic Letter of Credit issuance on the blockchain, a significant use case among its initiatives. This consortium comprises 18 banks, encompassing both leading public and private sector banks in India. Karad underscored that the government-backed Reserve Bank Innovation Hub (RBIH) has conceptualized an interoperable Distributed Ledger Technology (DLT) platform for the financial landscape. In June 2022, a successful proof-of-concept (POC) test was conducted involving banks, DLT fabric partners, DLT application layer partners, and fintech startups.
No Prescribed Guidelines for Blockchain Platforms
Responding to queries in the Lok Sabha, Karad clarified that there is currently no proposal to establish guidelines or prescribe a model common blockchain technology platform for banks. This stance underscores the ongoing collaborative and exploratory nature of blockchain implementation in the Indian banking sector.
PSB Alliance’s Vision
On a parallel track, the Public Sector Banks (PSB) Alliance, established by state-run banks, is gearing up to launch a digital balance confirmation portal. This innovative platform will offer various microservices, including multi-party underwriting and a shared blockchain technology platform for LC issuance, among other applications catering to corporate borrowers. The envisioned platform is designed to facilitate the writing and deployment of smart contracts while seamlessly integrating with the existing enterprise software of all PSBs.
Inclusive Approach of PSB Alliance
The PSB Alliance aims to onboard a diverse array of regulated entities, comprising both unlisted and listed firms, partnership and cooperative firms, funds, and trusts. Projections indicate that approximately 12 lakh entities, including cooperative firms, could be integrated into the platform over the next five years. Acting as an intermediary for all public-sector banks, the PSB Alliance remains committed to creating common platforms or applications that focus on delivering both financial and non-financial banking services directly to customers’ doorsteps.
In conclusion, these advancements underscore the Indian banking sector’s commitment to embracing technological innovations such as blockchain, paving the way for enhanced efficiency, security, and inclusivity in financial services.