The Reserve Bank of India (RBI) is enlisting several top banking institutions in the country to run a blockchain-based pilot project centered on trade financing. The project’s objective is to make blockchain a part of India’s Core Banking System.
According to a report by the Economic Times (ET), the project is driven by the central bank’s innovation hub in Bangalore, with technology support from U.S.-based companies, including IBM and Corba Technologies, as well as Belgium-based SettleMint.
Top 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 involved.
According to people familiar with the development, if successful, the “proof-of-concept” project will bring more transparency and reduce fraud in bank lending operations. It will do this by using blockchain technology to keep tamper-proof Letter of Credit (LC) records.
“This is to assess how blockchain can facilitate and secure our banking system,” one of the persons said above, with another adding: “The pilot has begun with banks to run blockchain-backed systems to issue digital LCs.”
The RBI Innovation Hub is said to have held a workshop with staff members of the participating banks to give them hands-on experience with distributed ledger technology (DLT).
The project is noted to be entirely separate from India’s central bank digital currency (CBDC) plans, although a similar approach will also be taken. It is also likely a response to an LC scandal that happened last year at the Punjab National Bank.
India’s blockchain technology adoption strides
While opposed to the popularity of digital assets, India has shown that it is open to the underlying blockchain technology. India is keen on launching its blockchain-backed CBDC as soon as possible.
Recently the RBI deputy governor T. Rabi Sankar said that the bank has revealed that the CBDC rollout is among its priority projects for the 2022-2023 fiscal year.
Meanwhile, India is also collaborating with international and local key players on other blockchain-focused projects. It is working on a soon-to-be-released digital currency consultation paper with the World Bank and the IMF.
India also signed a bilateral trade agreement with the United Arab Emirates that will see the two countries collaborate on emerging technology, including blockchain.
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