15 Banks Form New Company to Process Letters of Credit in India Using Blockchain Technology

IBBIC's new system will verify data for invoices on goods and services tax, eliminate paperwork and significantly reduce transaction times.

Jun 16, 2021 at 3:29 a.m. UTC
Updated Sep 14, 2021 at 1:11 p.m. UTC

Fifteen banks have formed a new company with a focus on using blockchain technology to process letters of credit for domestic transactions in India.

According to a report by the Economic Times on Tuesday, 10 private-sector banks, four public-sector banks and a foreign bank have forged the Indian Banks' Blockchain Infrastructure Company (IBBIC).

The company's new system will verify the data for invoices on goods and services tax and "e-way bills," eliminating paperwork and significantly reducing transaction times. E-way bills refer to electronic-way bills, which is a way to track the movement of goods and services electronically to make sure commerce complies with tax laws.

Executing letters of credit on blockchain has been tested before, but IBBIC's move marks the first attempt for domestic trade finance, according to the report.

Domestic letters of credit act as sureties for the seller that goods or services will be paid for when they eventually arrive.

RBL Bank, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, Yes Bank, South Indian Bank, Federal Bank and IDFC First Bank are the 10 private banks.

The four public sector banks include the State Bank of India, Bank of Baroda, Canara Bank and Indian Bank, while Standard Chartered is the foreign bank involved in the new company.

"Disbursements on domestic LCs, which used to take four to five days, can be done in four hours," said Varun Bakshi, head of products, transaction banking at RBL Bank.

Bakshi also said a blockchain-based letter-of-credit system can eliminate fraud because of encryption and because no two letters of credits would be able to be issued for the same invoice, which "sometimes happens".

The new venture is expected to commence within a year, according to the report.

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
Grayscale Investments to List Its First ETF in Europe

The Grayscale Future of Finance exchange-traded fund will list on the London Stock Exchange, Deutsche Börse and Borsa Italiana.

The Grayscale Future of Finance exchange-traded fund will list on the London Stock Exchange, Deutsche Börse and Borsa Italiana.

2
Indian Central Bank Says Cryptos Could Lead to "Dollarization" of Economy: Report

RBI officials said cryptocurrencies could undermine the central bank's capacity to regulate flow of money.

RBI officials said cryptocurrencies could undermine the central bank's capacity to regulate flow of money.

3
Nigeria’s SEC Affirms All Digital Assets Are Securities in New Rulebook

Rules look to clarify crypto’s role in the economy by providing a regulatory framework.

Rules look to clarify crypto’s role in the economy by providing a regulatory framework.

4
First Mover Asia: Singapore’s Regulators Will Be Eyeing Local Crypto Companies After Terra Collapse; Bitcoin Rebounds

Terraform Labs, the Singapore-registered company behind the Terra protocol, doesn’t have a permanent office in the city-state; most major cryptos spent Sunday in the green.

Terraform Labs, the Singapore-registered company behind the Terra protocol, doesn’t have a permanent office in the city-state; most major cryptos spent Sunday in the green.