Today India’s Economic Times reported that a consortium of 15 banks have created a blockchain trade finance consortium. Called the Indian Banks’ Blockchain Infrastructure Co (IBBIC), the consortium will initially target domestic Letters of Credit.
The banks involved include India’s largest such as State Bank of India, ICICI and HDFC Bank, as well as Standard Chartered.
IBBIC aims to cut transaction times from 4-5 days to a matter of hours and reduce the volume of paperwork given Letters of Credit are very paper-intensive. However, another major issue in trade finance is fraud, specifically submitting paperwork to different lenders to raise more than the shipment value. Using a blockchain, it should be far harder to raise multiple Letters of Credit for the same goods shipment.
It’s not the first time blockchain has been used to mitigate trade finance fraud in India. As early as 2018, a blockchain platform was launched by Monetago for open account trade finance. The fraud prevention solution attracted many of India’s trade finance platforms and helps to ensure that invoices are not used to raise finance multiple times from different organizations.
As with the IBBIC solution, the Reserve Bank of India was involved in discussions.
The Letter of Credit solution is raising 50 million rupees ($680,000) from each bank for a total of $10.2 million funding and will use the Infosys Finacle Connect solution. It’s expected to launch later this year.
There are several blockchain trade finance solutions, many of which havean international focus, with Contour and komgo focusing on Letters of Credit. Notably, Standard Chartered is a founding member of Contour.
The full list of consortium participants are State Bank of India (SBI), ICICI Bank, HDFC Bank, RBL Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, Yes Bank, South Indian Bank, Federal Bank, IDFC First Bank, Bank of Baroda (BoB), Canara Bank, Indian Bank and Standard Chartered.