Indian banks are actively embracing blockchain technology for enhanced security, transparency, and efficiency in their operations
India’s largest public sector bank, the State Bank of India (SBI) along with 14 other national banks has formed a new company called the Indian Banks’ Blockchain Infrastructure Company Private Limited (IBBIC) for designing, building, implementing, and commercializing blockchain.
The system behind the idea is also known and more commonly recognized in India as distributed ledger technology (DLT). This is mainly to help deal with a persisting problem of processing Letters of Credit (LCs), GST invoices, and e-way bills.
The industry expects the system to go live in the latter half of 2022. Moving forward, the modernization of domestic LCs will be followed by complex use cases such as collateralized loan disbursal, deeper credit rating, and transaction traceability.
In another corner, open banking is set to come in all guns blazing with the introduction of Blockchain-based open banking in India, where a main player to watch out for is Banglore-based Polygon.
How Else Will Blockchain Make Waves in Finance in India?
Blockchain technology is set to revolutionize various sectors in India beyond banking, paving the way for transformative changes across industries.
By enabling secure and efficient data sharing, reducing fraud, and enhancing trust, blockchain is poised to make waves in India, driving innovation and bringing about unprecedented levels of efficiency and accountability in diverse areas of finance.
Money Transfer
Heavily influenced by Bitcoin, transfer apps for a variety of cryptocurrencies are exploding in popularity right now. The system that backs this – Blockchain – is especially popular in finance for the money and time it can save financial companies of all sizes.
By eliminating bureaucratic red tape, making ledger systems real-time, and reducing third-party fees, blockchain can save the largest banks $8 - $12 billion a year.
Smart Contracts
Smart contracts are contracts with the rules of the contract enforced in real-time on a Blockchain. It eliminates middlemen and adds levels of accountability for all parties involved. This saves businesses time and money, while also ensuring compliance from involved participants.
Blockchain-based contracts are becoming popular as sectors like finance, government, healthcare, and the real estate industry explore their core use. Which is, decentralizing trust-based transactions with an assurance of zero-fraudulent activity.
The DEA's report on Blockchain in India mentions that state governments are expected to examine the feasibility of DLT for land records and management.
Government Finance
One of the most unsurprising applications of blockchain is for the improvement of government processes. Apart from securing government documents, Blockchain improves bureaucratic efficiency, and accountability, and can reduce massive financial burdens.
In India, the official report suggests that blockchain / DLT use cases will be explored by the Department of Economic Affairs, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA), and Insolvency and Bankruptcy Board of India (IBBI).
Moreover, it also mentions that the state governments must examine the feasibility of using DLT for land-record management.
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