The Reserve Bank of India (RBI) has locked in HDFC Bank, ICICI Bank and State Bank of India among almost a dozen lenders across the region to operate a blockchain-based pilot project centered on trade financing, The Economic Times reported Thursday (June 23).
The effort could help prevent loan fraud across India, an issue that became problematic in the nation when fugitive borrowers Nirav Modi and Mehul Choksi gamed the system to siphon off thousands of crores of rupees, according to the report.
Belgium-based SettleMint, United States-based Corda Technologies and IBM would provide technology support for the project, which would be centered in RBI’s Innovation Hub in Bangalore, the report stated. Axis Bank, Bank of Baroda and Union Bank of India are also involved in the pilot project that will harness blockchain technology to improve the traceability of money.
“We are participating and supporting the initiative,” said a Bank of Baroda spokeswoman.
The RBI, other banks and technology partners did not respond to The Economic Times’ requests for comment.
Technology providers are working with individual banks under the stewardship of the RBI as part of the effort to determine how blockchain can facilitate and secure the banking system, according to the report.
The tampering of documents like Letters of Credit (LC) is one of the project’s focus areas, and blockchain technology can help prevent the misuse of LCs. The objective is to make blockchain technology a part of the Core Banking System (CBS), the report stated.
“The pilot has begun with banks to run blockchain-backed systems to issue digital LCs,” an executive involved in the process said in the report.
Earlier this month, RBI said in its annual report that it’s looking for a crypto “killer” and sees a central bank digital currency (CBDC) as the weapon of choice.
Read more: India Lauds Crypto ‘Killer’