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IBDIC working on Letter of Credit on blockchain

The government said on Monday that the Indian Banks’ Association (IBA) has informed that the Indian Banks’ Digital Infrastructure Company (IBDIC) is currently working on scoping the implementation of domestic Letter of Credit (LC) issuance on blockchain as one of its use cases.

Minister of State for Finance Bhagwat Karad stated in Lok Sabha that, as per IBA, only a few banks are using blockchain technology on a small scale.

“As such, the issue pertaining to interoperability of such a platform between banks is not present,” he noted in a written reply, adding that Indian Banks’ Digital Infrastructure Company (IBDIC) Private Limited, formerly Indian Banks’ Blockchain Infrastructure Company (IBBIC) Private Limited, incorporated with the objective of providing a platform for exploring, building, and implementing digital solutions for the Indian financial services sector, is currently working on scoping the implementation of domestic Letter of Credit (LC) issuance on blockchain as one of its use cases.

The consortium consists of 18 banks, including leading public and private sector banks in India.

Karad further stated that the Reserve Bank Innovation Hub (RBIH) conceptualised the idea of an interoperable Distributed Ledger Technology (DLT) platform for the financial ecosystem and conducted a successful proof-of-concept (POC) exercise in June 2022 with banks, DLT fabric partners, DLT application layer partners, and fintech startups.

“There is no proposal to set up guidelines or prescribe a model common blockchain technology platform for the banks,” he stated in his written reply in Lok Sabha.Set up by state-run banks, PSB Alliance Private Limited is looking to set up the Digital Balance Confirmation Portal, which will also provide other microservices, including a common blockchain technology platform for the issuance of letters of credit and multi-party underwriting, among other applications to be used by corporate borrowers.The proposed platform will also be able to support the writing and deployment of smart contracts and will integrate with the existing enterprise software of all PSBs.

PSB Alliance is looking to onboard a host of entities, including both listed and unlisted firms, partnership and co-operative firms, funds, and trusts. As per initial projections, around 12 lakh entities, including cooperative firms, can be onboarded within the next five years.

PSB Alliance Private Limited acts as an intermediary for all public-sector banks and creates common applications or platforms. The firm focuses on delivering financial and non-financial banking services to customers’ doorsteps.

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