SBI Takes Lead in Blockchain, to Use it to Pre­vent Fraud

The Economic Times - - Finance & Commodities - San­gita.Me­hta@ times­

Mumbai: State Bank of In­dia has taken the lead in bring­ing lenders and tech com­pa­nies to­gether for us­ing blockchain tech­nol­ogy to share in­for­ma­tion among banks which will even­tu­ally help pre­vent frauds and tackle bad loans which are al­most one­fifth of banks’ loan book.

The SBI’s ini­tia­tive, chris­tened Bankchain, is in part­ner­ship with IBM, Mi­crosoft, Sky­lark, KPMG and 10 com­mer­cial banks. The coun­try’s largest lender has also tied up with a startup firm Primechain Tech­nolo­gies for this ex­er­cise. Axis Bank, ICICI Bank and Federal Bank, which are ex­per­i­ment­ing with this tech­nol­ogy in some way or the other, have teamed up with SBI as well.

Blockchain, the tech­nol­ogy be­hind cyber cur­rency Bit­coin, fol­lows the con­cept of a cen­tralised reg­istry that can be ac­cessed by all mem­bers, and every event is reg­is­tered as an un­al­ter­able ‘block’. “Be­ing the largest bank, SBI has taken the lead in ini­ti­at­ing blockchain, and we are in talks with banks and other com­pa­nies for this,” said M Ma­ha­p­a­tra, deputy man­ag­ing di­rec­tor, SBI, con­firm­ing the devel­op­ment to ET.

“To start with, we have formed a fo­rum which has pro­posed to start with trade fi­nance and loan doc­u­ments can be put on the block,” he said. Bankers said that dig­i­tally signed doc­u­ments that are part of con­sor­tium lend­ing and which have to be shared can be put up as a block so that they will be known to all mem­bers. (At present, they are ei­ther phys­i­cally ex­changed or mailed to each other). All the sub­se­quent events re­lated to the loan can be put on the block so that mem­bers can take in­formed de­ci­sions. An­other busi­ness where blockchain can be used as a tool is in trade fi­nance where there’s a risk of fraud with the mer­chant go­ing to mul­ti­ple banks with the same in­voice to get the bill dis­counted. If doc­u­ments are put on the blockchain, ev­ery­one will know which in­voices have been dis­counted by Bank X and this could pre­vent mul­ti­ple dis­count­ing frauds. “To­day, there are sev­eral banks pur­su­ing in­di­vid­ual blockchain strate­gies. These in­di­vid­ual ini­tia­tives will be mean­ing­ful when they are used by all the banks. For in­stance, a pay­ment sys­tem such as NEFT can­not be suc­cess­ful if it is adopted by only one bank,” said a se­nior bank of­fi­cial .

chris­tened Bankchain, is in part­ner­ship with IBM, Mi­crosoft, Sky­lark, KPMG and 10 com­mer­cial banks

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