The Reserve Bank of India (RBI) hopes to cooperate with multiple top Indian banks to build a proof-of-concept blockchain project focusing on trade financing.
Among those taking part in the scheme to combat loan fraud are HDFC Bank, ICICI Bank, and State Bank of India, as reported by The Economic Times.
The project will issue digital versions of documents such as letters of credit (LC) to prevent their alteration. Digital documentation could prevent scams involving billions of rupees, such as those perpetrated by Nirav Modi and Mehul Choksi.
The central bank intends to integrate blockchain technology into its core banking system and will utilise this experiment to demonstrate the concept’s viability.
IBM (IBM), Corda Technologies, and SettleMint of Belgium are contributing technological support for the project, according to a report citing sources familiar with the situation.
Although India’s central bank is noted for its anti-crypto attitude, Governor Shaktikanta Das has stated that blockchain technology may exist without cryptocurrency.
Last week, Shaktikanta Das, governor of the RBI, had emphasised the need for a global strategy to regulate technology-based businesses, such as blockchain platforms.
Governor Das made the following remarks in his speech at the FE Modern BFSI Summit 2022: “Different blockchain platforms cannot be linked to a regulator or a particular nation. Another example is of decentralised finance, where financial applications are processed on a blockchain with minimum involvement of centralised intermediaries.”
The governor also pointed out the dangers of Decentralised Finance, or DeFi. He said, “DeFi causes unique challenge to regulators as its anonymity and lack of a centralised governing body and legal uncertainties can make conventional regulation ineffective. This therefore is a case for a globally collaborated and regulated approach as well as inter-regulatory coordination to enable comprehensive assessment of such activities and mitigation of risks”
Blockchain is a distributed ledger that records, shares, and synchronises transactions in an electronic ledger using several computers.