The new blockchain technology will make it possible for small companies to get loans in an entirely different way. 11 of the largest Indian banks are joining hands together to start a new initiative of linking funding system with blockchain. This consortium of banks consists of ICICI Bank, Axis Bank, HDFC Bank, Kotak Mahindra Bank which are few among the 11 largest loan providers. They are all set to initiate the very first blockchain-linked loan providing system. The main target is the small and medium enterprises (SME), and the aim of this initiative is to eliminate communication barriers among India’s biggest banking service providers.
The live network is being set up by the spokesperson of a few big banks of India. Through live networking, they will achieve more systematic and secure supply-chain financing. It was told by the ICICI Bank’s head of business technology, Abhijeet Singh that ensuring a considerable amount of transparency in credit payments will be the key objective.
Each supply-chain player occasionally has contradictory technology stack as well as a different degree of technical competence because which the complete process becomes very time-consuming says the head of fintech, Akhil Handa and Bank of Baroda’s new business initiatives also agree.
There is a consortium known as the ‘Blockchain Infrastructure Company (BIC)’ that is organizing a meeting between the participating banks. Bank of Baroda, IndusInd Bank and State Bank of India are some other banks that will be taking part in the meeting as the external members. Some of the other banks among this consortium are Yes Bank, Standard Chartered Bank, South Indian Bank, and RBL Bank.
The risks involved in the loaning process will be removed as the live network will permit large lenders to retrieve public credit information. This type of technique will eliminate the wisdom hierarchies among the big financial organizations and SME credit providers.
It was said by Viral Acharya who is a Deputy Governor at RBI that the financial status penetration for the sector of small and medium enterprises (MSME) is very low and the ticket size is usually between Rs 10 lakh and Rs 1 crore. All the commercial banks’ that had MSME sector shown in the most recent data as per central bank that percentage of total outstanding corporate credit with the lenders was only 17.3%.
It is anticipated by financiers that if there is a system that is blockchain-based through the industry, it will offer a solution and reduce expenses and financial standing catchment area by bringing additional SMEs within the formal credit system.