India Bank Completes Trade Finance Blockchain Trial

Announcements, Blockchain, FinTech, Innovation, Investing, News, Regulation | May 18, 2017 By:

One of India’s largest private banks has implemented a blockchain-based trade settlement system for a client.

Kotak Mahindra Bank, in partnership with Deloitte, has completed a trade finance transaction using blockchain technology. The blockchain trade financing operation aims to reduce the time taken for the letter of credit (LC) from 20-30 days to only couple of hours. These LC’s are a negotiable instrument and critical document in domestic and international trade finance.

Kotak and Deloitte used the technology to complete LC transactions with JP Morgan Singapore as the partner bank – from issuing the LC for outbound transactions to transferring trade documentation for inbound LCs to facilitating the transaction funds using Swift.

Kotak claimed that it is the first bank in India to have successfully completed the proof of concept (PoC) for end-to- end trade finance transactions, and will soon roll out this technology for all customers.

“In an evolving digital ecosystem, while instant money transfers have progressed significantly, trade finance in India has a lot of catching up to do,” said KVS Manian, president, corporate institutional and investment banking at Kotak Mahindra Bank. “Blockchain, the ‘distributed ledger’ technology has emerged as an object of intense interest in the financial services industry and beyond. Since 2008, the blockchain technology has evolved from a way of recording transactions to a digital revolution that has the potential to be highly secure, transparent, resistant to outages, auditable, and efficient.”

Kotak Mahindra Bank said that they envision a future where banks will collaborate and participate in blockchain consortiums, which will help improve operational efficiency, reduce risk of fraud, and improve the customer experience in key offerings like know-your-customer, cross border payments, imports/exports finance, supply chain finance, and other functions.

“In the Indian context, banks are experimenting with blockchain applications in various areas of transactions journey and processes, including paper intensive processes of trade finance and supply chain financing segments, which are ripe for disruption,” said Manian. “Our proof of concept transaction will change the narrative hereon. We are leveraging this technology to give our clients hassle-free and profitable trades finance solution on an almost real time basis.”