15 Indian banks form blockchain company to process Letters of Credit  |  Photo Credit: Thinkstock
- 15 Indian banks jointly formed Indian Banks’ Blockchain Infrastructure Co Pvt Ltd (IBBIC)
- Each bank will have equal stake of 6.6% in company which will have capital of Rs 75 crore
Fifteen banks joined hands to form a company that will use blockchain to process letters of credit (LCs) for domestic transactions in a first move of its kind in India.
The use of blockchain-based technology will remove paperwork reduce transaction time, the bankers said.
Disbursing LCs take four to five days which can be reduced to four hours, Varun Bakshi, head of products, transaction banking, at RBL Bank told Economic Times.
The technology will also reduce fraud as transactions will be encrypted via blockchain and no two LCs can be issued on the same invoice which sometimes occurs, he added.
RBL Bank is one of the 15 banks which holds an equal stake of 6.66% in the company called Indian Banks’ Blockchain Infrastructure Co Pvt Ltd (IBBIC).
There are 10 private banks, four state-owned lenders and foreign lender which formed the IBBIC. These include RBL Bank, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, Yes Bank, South Indian Bank, Federal Bank, IDFC First Bank, State Bank of India (SBI), Bank of Baroda (BoB), Indian Bank, Canara Bank, and Standard Chartered.
Each bank will invest Rs 5 crore in the company which was registered in the last week of May. The banks will complete their investment by June 30 and the total capital in the company will be Rs 75 crore, the report added.
The company will also have a five-member shareholders’ directors’ board which will have representatives from BoB, ICICI, Axis, Kotak and SBI. Shareholder directors will be appointed on a rotation basis annually.