State-run Banks Plan Common Blockchain Platform To Map Clients

India's state-owned banks are contemplating the establishment of a unified blockchain technology platform for issuing letters of credit and enabling multi-party underwriting, among other applications for use by their corporate clientele, according to sources familiar with the matter.

Once a business entity is registered on the proposed Digital Balance Confirmation Portal, all its bank accounts and credit facilities obtained from each bank would be linked, providing a more comprehensive view of a potential borrower.

This would enable lenders to expedite decisions and offer a more streamlined and secure solution for stakeholder entities and auditors, stated the sources.

The suggested platform would also facilitate the creation and execution of smart contracts and seamlessly integrate with the current enterprise software of all public sector banks (PSBs), as per a bank executive. They added that this would also lower credit intermediation expenses for the banks.

The initiative is slated to be spearheaded by PSB Alliance Private Limited, established as an intermediary for all the PSBs in 2010 with a mission to develop shared applications and platforms, according to the executive.

PSB Alliance aims to bring aboard a range of entities, encompassing both listed and unlisted firms, partnership and cooperative firms, funds, and trusts. Initial projections suggest that approximately 1.2 million entities, including cooperative firms, can be integrated over the next five years.

PSB Alliance is also in the process of constructing a unified digital platform, which will permit fintech players to participate and operate on a revenue-sharing model with the lenders.

The move by state-owned banks follows a similar endeavor jointly undertaken by private and public sector banks, which made minimal progress.

"Moreover, the proposed Digital Balance Confirmation Portal will offer various additional microservices through this platform," stated another executive who chose to remain anonymous.

The Institute for Development and Research in Banking Technology will extend technical consultancy and oversight for the proposed solution.

Last year, Indian Banks' Blockchain Infrastructure Co., Ltd. was established by a consortium of 18 banks, including the country's largest bank, the State Bank of India. It had put forth the idea of offering Blockchain LC (letter of credit), replacing traditional, paper-based LC processes with a secure, transparent, and efficient digital platform.

"Progress has been slow since then. That is why PSBS have decided to forge ahead with this new initiative," explained the executive.

This platform will possess the capability to create and deploy private ledgers and allow the choice of sharing private data among network participants.

The government has also urged PSBS to collaborate, expand shared utilities and initiatives, and initiate peer-to-peer cooperation by building and exchanging technology, operations, and human resources capabilities.

The Reserve Bank of India has identified blockchain technology as one of the innovative technologies that innovators can utilize to test their products in the regulator's sandbox environment.