By Prarthana Mitra
The State Bank of India had announced its plans to deploy blockchain in FY19 in its reconciliation, remittances and trade finance operations immediately after the Budget for the next fiscal was tabled in February. As a step forward, SBI now seeks to set up a blockchain-based exchange for bad debts and assets with other banks and investors, informed SBIs Head of Innovation Sudin Baraokar on Friday.
Bankchain: A consortium of banks
Indias largest public sector bank is currently working with 30 other banks to enable data-driven price discovery and blockchain-based financial solutions through a common platform called Bankchain. Business Line calls it a unified IT infrastructure involving a mix of public sector, cooperative and foreign banks, as well as global IT companies to bring down development time for technology-based financial services and guide the traditional banking sector into blockchain.
Baraokar exhorted that a unified structure that takes into account all key players is necessary to pre-empt loan frauds and collusions like the recent PNB-LoU case, which involved the state bank issuing a number of Letters of Undertaking in favour of Nirav Modi who absconded earlier this year.
Once the blockchain-based Bankchain is successfully adopted, there will be greater transparency, as every participant will be aware of the origin and final destination of the transaction along with the route of asset flow, according to Baraokar.
Setting a progressive example
Currently saddled with $30billion worth of non-performing assets, SBIs move is expected to provide a viable platform for data-driven price discovery, while plans to extend it to trade finance and loan exchanges are already in the pipeline. SBI, one of the earliest adopters of IT in India, has always been the first to implement emerging trends in financial services.
This initial adoption of the technology at the level of individual banks is being seen as the first step of evolution for Indian bankers, who are slowly warming up to the advantages of incorporating blockchain technology to improve their operations.