Kotak Mahindra Bank, one of India’s largest private banks, has successfully completed an end-to-end trade finance transaction with a client over a blockchain.
According to a report in Indian business daily Economic Times, ‘the first of its kind transaction’ sees the bank partner services giant Deloitte to complete the trade finance test with partner bank JP Morgan Singapore.
A traditionally paper-intensive process, trade finance transactions are enabled by a letter of credit (LC). The letter sees bank guaranteeing a buyer’s payment to a seller on an agreed date and is a critical document in any trade finance transaction, particularly in international transactions.
Manual oversight and the lack of efficiency in international trade could take several weeks to obtain a letter of credit. With blockchain technology the time taken is reduced to a few hours, Kotak Mahindra revealed.
“In the Indian context, banks are experimenting with blockchain applications in various areas of transactions journey and processes, including paper intensive processes of Trade Finance and Supply Chain financing segments, which are ripe for disruption,” stated KVS Manian, president of corporate institutional and investment banking at the private lender. “Our proof of concept transaction will change the narrative hereon.”
In its trade finance test, issuance of the letter of credit for outbound transactions, the transfer of trade documents for the inbound letter of credit and the transfer of funds – through Swift – were all facilitated using Deloitte’s blockchain technology.
He added:
We are leveraging this technology to give our clients hassle-free and profitable trades finance solution on an almost real time basis.
The executive sees the new feature to bring easier and more efficient financing options for Indian importers, exporters and domestic traders alike.
Further, Kotak Mahindra hinted at a future banking consortium dedicated to the development of blockchain solutions in areas including KYC (Know Your Customer), cross-border payments, import/export finance, supply chain finance, syndicated loans, regulatory auditing and more.
Elsewhere, Indian conglomerate and multinational Mahindra is already developing supply chain finance solutions in the country with industry giant IBM. Traditionally known as a hub for technology development, India is quickly becoming a hub for blockchain R&D, with the likes of Visa establishing an exclusive blockchain development center in the country, staffing upwards of 1,000 engineers and developers.
Major Indian private lender Yes Bank has completed a blockchain trial to digitize vendor finance earlier this year, using technology sourced from the Linux Foundation-led open-source blockchain project, Hyperledger. One of India’s largest private banks, ICICI, completed blockchain pilots in cross-border remittance to Dubai and trade finance transaction involving the import of shredded steel melting scrap last year.
In a significant endorsement of blockchain technology this year, the Indian central bank’s research arm stated that the innovative technology had “matured enough” to enable the digitization of the rupee, India’s fiat currency.
Source: cryptocoinsnews.com