With the growth of Bitcoin, it’s associated technology, blockchain has quickly become a next-big-thing in the world of finance. Major financial institutions have given a go-ahead for using blockchain technology to simplify or automate existing systems. The Institute of Development and Research in Banking and Technology with its research papers with IIT Bombay and Monetago has given a thumbs-up for blockchain tech in Indian financial systems.
Developed by Satoshi Nakamoto (pseudonym), blockchain is a distributed ledger system managed by the P2P network, backed with proof-of-work/validation protocol. Any change in the distributed ledger cannot be done until it gets the approval of the network majority.
BankChain, India’s first Blockchain exploration consortium for banks was announced in Mumbai on 8th February, 2017. State Bank of India (SBI) has taken the initiative to take this effort forward as it believes that it is essential for banks to collaborate and develop Blockchain solutions for the betterment of the financial sector. It is managed and operated by PrimeChain Technologies. A total number of 28 financial institutions are its members. State Bank of India, ICICI Bank, DCB Bank, Kotak Mahindra Bank, Federal Bank, EXIM Bank, National Payments Corporation of India, Bank of Baroda etc are members of Bankchain (blockchain for banking) consortium.
In May 2017, the bankchain consortium successfully tested KYC AML/CFT platform ClearChain. In addition to Clear-Chain, the consortium is also exploring blockchain applicability in other areas including syndication of loans, trade finance, asset registry & asset re-hypothecation, secure documents, cross-border payments, peer-to-peer payments, and blockchain Security Controls.
State Bank of India recently announced that they are planning to launch blockchain based smart contracts and KYC under Beta of ClearChain in December 2017. Digitally signed contracts can be accessed by the verifiable source through mobile. This technology is safe as the banking personnel would have 100% control over the data with instant support. Blockchain will minimise frauds and maximize efficiency, security and transparency in the supply chain, global money systems and fintech in an open source environment. A lot of internal processes can be contracted. We do a lot of IT procurement, a lot of it can be implemented using Blockchain.
PrimeChain KYC would enable sharing of data among member banks. For example, a person named Rahul has taken a loan from ABC Bank and has Rs. 10 lakh savings in XYZ Bank. If Rahul voluntarily on defaults the loan in ABC Bank and then XYZ Bank could able to share data of Rahul’s account summary with ABC Bank. This would result in the reduction of Non-Performing loans. “It is also de-risking our investment in emerging tech so that all banks can come and invest at once…we can also share knowledge and reduce the cost,” said senior officials of State Bank of India.
This collaborative effort among Indian banks to develop blockchain solutions under a common roof is the next-big-thing for India’s banking sector.
– Chaitanya Kulkarni