Fifteen banks in India have come together to form a new company, IBBIC, with a focus on leveraging blockchain technology to process letters of credit (LC) for domestic transactions within India.
The new company, Indian Banks' Blockchain Infrastructure Co Pvt Ltd (IBBIC), will have fifteen shareholders; including ten private sector, four public sector and one foreign bank; holding an identical 6.66% stake in the company.
Though experimentation and implementation of LCs on blockchain rails have been done before also, this move marks the first endeavor for domestic trade finance, according to a report from ET.
The 10 private banks include RBL Bank, Axis Bank, IndusInd Bank, Yes Bank, ICICI Bank, HDFC Bank, Federal Bank, Kotak Mahindra Bank, South Indian Bank, and IDFC First Bank. Public sector banks include the State Bank of India, Canara Bank, Bank of Baroda, and Indian Bank. The Standard Chartered is the foreign partner in the company.
This new open architecture model venture is expected to start within a year, as per the report. Disbursements on domestic LCs, which takes four to five days, will be done in few hours, leveraging blockchain technology, by the new system. Blockchain-based LC system will also knock-out fraud due to encryption and the fact that no two LCs would be able to be issued on the same invoice.
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