Some of the prominent Indian banks are coming together to create a new company that will leverage the potential of blockchain tech to accelerate the processing of Letters of Credit (LCs). IBBIC (Indian Bank’s Blockchain Infrastructure Company Private Limited) is an alliance of 15 banks including HDFC, ICICI, RBL, Canara and SBI Bank. The system will be based on Infosys’ Finacle Connect. Infosys’ Finacle Connect is a blockchain-based platform that allows automation and digitization of trade-related finance processes.
The banks will be using this technology to solve a central problem in customary banking – the processing of Letters of Credit, e-way bills and GST invoices. IBBIC will be in charge of this transformation.
The gesture is expected to reduce transaction processing time, remove paperwork and provide a safe environment. Moreover, it can be a benefit for medium and small-scale enterprises (MSMEs).
For the unversed, LCs are letters from a bank that ensure that a buyer will pay the seller on time and the correct amount. Lately, the method of issuing an LC is comparatively slow and demands human involvement to avert frauds, balance the ledger and authenticate transactions.
Using blockchain to issue LCs would potentially solve these problems. Even elemental fraud like the issuance of 2 LCs on a single bill can be easily prevented with the aid of this blockchain tech.
The new system is predicted to go live within a year. Also, each bank has an equal stakeholdership of 6.66%. It will be crafted to be open, making it seamless for other banks to join anytime in the future.