The Bank of Mauritius's (BoM's) newly launched Innov8 initiative is to join the Reserve Bank of India's (RBI's) Innovation Hub initiative that has developed a proof-of-concept (PoC) for the processing of letters of credit (L/Cs) using distributed-ledger technologies, according to the BoM's governor, Harvesh Seegolam.

Speaking at the launch of the Innov8 initiative, a recorded version of which can be found on the Bank of Mauritius Youtube channel, the governor said his central bank would even look to more alliances with counterparts and is "looking forward to proposing the creation of a regional sandboxing regime with friendly central banks in our part of the world."

Blockchain L/C processing

The RBI's Innovation Hub initiative has developed a PoC for processing L/Cs using distributed ledger technology (DLT), commonly known as blockchain.

This project aims to streamline and digitise the traditionally paper-based process of issuing and settling L/Cs.

Digital benefits

By utilising DLT, the system enhances transparency, reduces fraud risks, and accelerates the transaction process, as all parties involved - banks, importers, exporters - can have real-time visibility of the transaction's status.

DLT ensures that all transactions are securely recorded in a decentralised manner, reducing the chances of discrepancies and errors that typically arise in manual processes. The RBI's initiative aligns with broader global trends to adopt blockchain in trade finance, providing a faster, more reliable, and secure mechanism for handling L/Cs.

Central bank innovation

This PoC is a part of RBI's broader efforts as India's central bank to encourage innovation in the fintech sector, focusing on increasing efficiency in financial operations through cutting-edge technologies.

The Bank of Mauritius's Innov8 initiative is an innovation hub aimed at promoting fintech development and enhancing the country's banking and payments sectors. This initiative provides a collaborative platform for entrepreneurs, industry experts, academia, and financial institutions to foster innovation and explore cutting-edge technologies such as DLT and digital currencies.

A discussion featuring Harvesh Seegolam speaking about the Innov8 initiative on the Bank of Mauritius Youtube channel can be found here.

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