Some major Banks in India are reportedly combining resources to harness blockchain technology in the lending business to cater to micro, medium and small scale enterprise (MSMEs) for transparency and reliability of credit data structures.
As reported by the Economic Times, a band of 11 banks to include Standard Chartered Bank, ICICI Bank, HDFC Kotak Mahindra Bank, and South Indian Bank are collaborating to launch the country’s first blockchain-based funding system for small and medium enterprises (SMEs).
Abhijeet Singh, head of business technology at ICICI Bank, a founding member-bank of the coalition. was quoted as saying, “The core objective of having such a ledger-network is to ensure transparency in credit disbursement, especially in the underbanked section.”
The credit data system in the region is a far cry from ideal; basically resulting from falsified or inaccurate credit assessments and profiling. This invariably affects the lender’s trust in such data as it exposes them to high-risk situations.
The system to be developed is described as one which will essentially allow participating banks to share data along the supply-chain through the blockchain, thereby ensuring the transparency and credibility of the data.
India has seen its fair share of blockchain activists and crypto sympathizers, however, the government through its regulatory body — the Reserve Bank of India — with its blanket ban on crypto, has made it tough for the crypto side of the industry to develop. This move by the collaborating banks, however, may prove useful to future adoption of blockchain technology in India.
No lost luster in India
Against the odds of the current crypto market, blockchain continues to prove in many ways and in different economic strata that it can ameliorate some of the major crisis ongoing in legacy systems plagued by lack of transparency and accuracy of data systems.
Perhaps Bitcoin and cryptocurrency hype is the problem after all and not blockchain. The government does frown at the idea of an unregulated cryptocurrency and is no longer keen on issuing a central bank digital currency any time soon despite claiming last year that it was considering it as an alternative to minting physical cash which weighed heavily on the government. It is now focused on structuring a formidable crypto legislature for the industry.
It does count as a win for the industry since such a blockchain-based initiative could be carried out by banks and not fintech startups, being the more dominant feature in blockchain space.
On the other hand, cryptocurrencies are also important streams in the balance for blockchain development and adoption, as they provide incentive models to keep certain blockchains decentralized — an essential quality of the technology.
The bottom line is; India may need to step up, as its indecisiveness may prove unfavorable in the long term. Just as reported by a recent Accenture report, noting that India must improve its skills pool with regards to emerging technologies.
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