The Reserve Bank of India (RBI) is engaging several of the country’s leading banking institutions to conduct a blockchain-based pilot focused on trade finance. The project aims to make blockchain a part of India’s core banking system.
According to a report in the Economic Times (ET), the project is being driven by the central bank’s innovation center in Bangalore, which has technical support from US companies such as IBM and Korba Technologies, as well as Belgian company Settlemint.
Leading banks currently involved in the pilot include HDFC Bank, ICICI Bank and State Bank of India (SBI). Axis Bank, Bank of Baroda and Union Bank of India are also included.
If the proof-of-concept project is successful, there will be more transparency and less fraud in banks’ lending operations, according to people familiar with the development. It does this by using blockchain technology to keep tamper-proof Letter of Credit (LC) records.
“To assess how blockchain can facilitate and secure our banking system,” said one of the people cited above, “a pilot project with banks to operate a blockchain-enabled system for issuance of digital LCs has begun.”
The RBI Innovation Hub is said to have conducted a workshop with employees from the participating banks to give them practical experience with Distributed Account Technology (DLT).
The project is fundamentally different from the Central Bank of India’s digital currency (CBDC) systems, although it also follows a similar approach. It could also be in response to an LC scam at the Punjab National Bank last year.
Advances in Blockchain Technology Adoption in India
Contrary to the popularity of digital assets, India has shown that it is open to the underlying blockchain technology. India is aiming to launch its own blockchain-backed CBDC as soon as possible.
Recently, RBI Deputy Governor T. Rabi Shankar said the bank announced that CBDC adoption is among its priority projects for the 2022-2023 financial year.
Meanwhile, India is also collaborating with major international and local players on other blockchain-focused projects. It is working with the World Bank and IMF on a forthcoming consultation paper on digital currencies.
India has also signed a bilateral trade agreement with the United Arab Emirates, in which the two countries will collaborate on emerging technologies, including blockchain.
See: BSV Global Blockchain Convention Panel, Blockchain for Government Data and Applications
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