India's second-biggest software services company says its recently launched blockchain-based trade finance network would avoid the recent spate of letter of credit (L/C) and letter of undertaking frauds.

Infosys says its network comprising seven private-sector banks will increase security and efficiency in the banking sector while also broadening its product offering.

Network expansion

Infosys, whose Finacle software powers the core functions of the majority of Indian lenders, is in talks to sign up more domestic and foreign banks to the network, senior company executives told the Reuters news agency.

The company claims its network will make transactions transparent for "the buyers, the sellers, the buyer's bank, the seller's bank and any regulator," according to Finacle's global head of product strategy, Rajashekara Maiya.

"With that kind of a capability, the technology can avoid all the fraud that could have taken place in a situation like Punjab National Bank (PNB)," he said.

Fraud concerns

The PNB fraud, now estimated at $2 billion, used letters of undertaking rather than L/Cs, but the latter have been routinely used in several gold and diamond frauds.

In the latest spate of jewellery sector frauds, Delhi-based jeweller Dwarka Das Seth International allegedly cheated Oriental Bank of Commerce out of US$57 million using fraudulent L/Cs processed with the connivance of bank officials.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.