Eleven banks in India that make up a consortium have come together to debut a blockchain initiative that has the potential to revolutionize how small businesses collect loans. The new loan system that is based on blockchain technology will be specifically accessible to SMEs and it will eliminate the communication barriers between the largest providers of banking services in India.
Blockchain-Linked Funding System For Small And Medium-sized Enterprises
The consortium is made up of some of the largest banks in India. According to the head of business technology at ICICI, Abhijeet Singh the goal of the initiative is to promote synergy. In his words:
“Blockchains can thrive when the ecosystem is working in synergy via a single network.”
For a while now, representatives of some of India’s largest banks have been developing a live network that will enhance the efficiency and boost the security of supply chain financing. Singh revealed that the primary aim of this effort is to improve transparency in the system. The blockchain-linked network will allow big lenders get access to public credit information. This will reduce the risk associated with the lending business. This system will also level the playing field between large and small-scale loan providers.
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The head of fintech at the bank of Baroda, Akhil Handa, said that all the players in the supply chain often have incompatible stack of technology and different levels of technical understanding. This is what makes the entire process slow:
“A normal blockchain network harmonizes all the requirements allowing everyone to see the how the flow of trade goes on a single platform.”
The participating banks are Kotak Mahindra Bank, ICICI Bank, Axis Bank, HDFC Bank, Standard Chartered Bank, Yes Bank, South Indian Bank, and RBL Bank. Apart from these banks, there are three other banks participating in the funding as external members. These banks are: Bank of Baroda, IndusInd Bank, and the State Bank of India. The meetings between participant will be organized by the Blockchain Infrastructure Company. This is an Indian-based consortium.
Leveraging blockchain technology is a good idea for both the loan providers and the consumers. Financial institutions will be able to reach more SMEs and invite them to participate in the formal credit system. These businesses will enjoy shorter settlement times and drastic cost reduction.
Blockchain technology is still in its early stage. As it advances, many financial servicing companies, data custodians, and supply chain operators will start implementing it. Already, some major companies are leveraging the technology. This hasn’t been without opposition. The blockchain industry has faced a lot of harsh criticism over the years. This includes opposition from India.
The Indian government hasn’t made it easy for the most common application of blockchain, cryptocurrencies, to thrive in India. Last year, there was a cryptocurrency ban placed on all banks in India. Towards the end of the year, banks announced that they would be closing the account of anyone who uses their bank accounts to deal in cryptocurrencies. Members of the cryptocurrency community in India have continued to find new ways to trade Bitcoins and other cryptocurrencies.
Do you think this funding network help boost the adoption of blockchain technology in India?