The Reserve Bank of India (RBI) is working with several banks and technology firms on a blockchain-based pilot project to tackle trade-based financial crime, with an emphasis on identifying falsified documents such as letters of credit (L/Cs) according to a report in the Economic Times.

The project aims to provide proof-of-concept that L/Cs and other documents can be digitised.

Digital documents could potentially prevent frauds such as those perpetrated by Mehul Choksi and Nirav Modi, who used fraudulent L/Cs and other documents to cheat Punjab National Bank out of US$2 billion (DC World News, 16 February 2018).

Project participants

Financial institutions involved in the pilot project include HDFC Bank, ICICI Bank and State Bank of India according to the report. Technology giant IBM, Corda Technologies and Belgium-based SettleMint are providing technological support.

Corda has worked central banks across the world, including in Canada, Japan, Singapore, Thailand and the UK as well as with the European Central Bank on distributed ledger technology projects. The blockchain system, which can be either public or private, is one form of distributed ledger design.

Digital strategy

India's central bank is intent on incorporating digital technology throughout its core banking system, which aims to enable the financial sector to leverage technology to provide better customer service, improved management and recording keeping and overall systems efficiency in the country's financial sector.

RBI hopes to use this pilot project as a means of demonstrating that this digital trade finance concept fits with the core banking system and is of utility in the real world.

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