India's state-owned banks are mulling the establishment of a new unified blockchain technology platform for issuing letters of credit (L/Cs), among other applications for use by their corporate clients.

The platform may be motivated, at least in part, by slow progress in the development of a blockchain trade finance consortium announced more than two years.

Just state-owned banks are expected to participate initially in the new proposed Digital Balance Confirmation Portal (DBCP), while the platform may subsequently be opened up to allow private sector bank participation.

Platform benefits

Once a businesses is registered on the DBCP, all its bank accounts and credit facilities obtained from each bank would be linked, providing a more comprehensive view of a potential borrower.

Participants on the platform should also be able to independently verify the authenticity of data captured to the blockchain, verify the identity of the participants submitting and validate the authenticity of any changes in the blockchain.

PSB Alliance

Additionally, the DBCP aims to prevent fraud enabled by discrepant bank balance confirmations and enable lenders to make more informed lending decisions.

The platform is also expected to support the creation and deployment of smart contracts and seamlessly integrate with enterprise software currently used by public state-owned banks (PSBs).

The DBCP initiative is expected to be led by the PSB Alliance, established in 2010 with the aim of developing shared applications and platforms

Slow progress

In 2021, fifteen founding entities established the Indian Banks' Blockchain Infrastructure Company (IBBIC), a blockchain trade finance consortium that also aimed to harness blockchain technology to process L/Cs (DC World News, 21 June 2021).

Four private banks and three banks in which the government of India has at least a majority share subsequently joined the founding banks that comprised ten private-sector banks, four public-sector banks and one foreign bank (DC World News, 4 August 2021).

Concerns that this initiative has been progressing slowly may help propel the new PSB Alliance led initiative as a viable way for India's banks to tap into the benefits of blockchain technology.

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