A group of 11 Indian banks have joined together to create a blockchain-based digital ledger system aimed at improving access to credit for micro-, small-, and medium-sized businesses, according to a report in India’s Economic Times.
The banks’ new Blockchain Infrastructure Company (BIC) will also make credit more transparent, secure, and cheaper for micro, small, and medium enterprises (MSME), which are underbanked and account for just 17.3 percent of the outstanding credit with Indian banks, the report said.
While describing the country’s 51 million MSME’s as “default-prone,” the Economic Times reported in March 2018 that they employ 40 percent of the workforce—117 million people—and account for 37 percent of GDP, according to the Ministry of Commerce. The credit requirements of these businesses reportedly ranges between $14,000 and $140,000.
The BIC will provide the lenders with better access to public data so they can better judge the creditworthiness of these businesses. The first phase of the project will be to set up a live network allowing supply chain vendors to register and digitise their records.
“All these supply-chain players, banks, logistics partners, customs, etc. have different technological platforms and technical competence,” the article quoted Akhil Handa, head of fintech and new business initiatives for the Bank of Boroda as saying. “[A] common blockchain network harmonises the requirements and lets everyone see the flow of the trade on a single platform.”
The point of the BIC is to facilitate communications between different banks, said Abhijeet Singh, head of business technology at ICICI Bank. “A blockchain network can only thrive if the entire ecosystem is working in synergy through a single network,” he added.
Along with ICICI Bank, the other consortium members that founded the BIC are HDFC Bank, Kotak Mahindra Bank, Axis Bank, Yes Bank, Standard Chartered Bank, RBL Bank, and South Indian Bank. IndusInd Bank, State Bank of India, and Bank of Boroda are outside members.
The Indian government has not been friendly to cryptocurrencies, with the Reserve Bank of India announcing in April 2018 that “entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs [virtual currencies].” Existing investors were given until this March to dispose of their cryptocurrency holdings.