RIL and HSBC execute blockchain trade, finance transaction

Reliance Industries (RIL) and Tricon Energy executed a first-of-its-kind blockchain-based Letter of Credit (LC) transaction facilitated by HSBC India and ING Bank Brussels.

Using R3’s Corda blockchain platform, the LC was issued by ING Bank on behalf of importer Tricon Energy (USA) with HSBC India acting as the advisory bank for RIL.

Hitendra Dave, head of global banking and markets at HSBC India, said: “The use of blockchain is a significant step towards digitising trade. It has a transformative impact on trade finance transactions and enables greater transparency and enhanced security in addition to making it simpler and faster. The overall efficiency it brings to trade finance ensures cost effectiveness, quicker turnaround, and potentially unlocks liquidity for businesses.” Banks across the world are adopting blockchain as a transparent, quick and secure platform for sharing documents, validating authenticity and enabling faster financial transactions.

When lenders issue LCs or structure a trade-financing contracts with their clients, the physical delivery of cements between each party through post, courier or e-mail involve substantial time and cost.

As a result of the successful implementation of a LC transition through blockchain, a spokesperson for HSBC India said, “Transaction validates the commercial and operational viability of blockchain as an alternative to conventional exchanges for paper-based documentation.”

On a blockchain platform, each of the four parties to these transactions could access documents and verify the authenticity of the information. LCs are paperbased documents, therefore an electronic document was created on the blockchain.

The nature of blockchain technology is that all parties or ‘nodes’ are given complete access to the transaction history taking place between all parts within the ‘chain’.

Each node can check to see which other party has amended the information or if they have completed one of their tasks as part of the larger trade-finance transaction.

“This reflects our continued commitment to embrace emerging technologies and industry first initiatives. The use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant 7 to 10 days to less than a day. When adopted at scale, it helps in significant optimisation of working capital,” said Srikanth Venkatachari, joint chief financial officer, RIL.