Indian Banks To Start Blockchain-Based Funding For SMEs To Avoid Defaulters

A total of 11 top Indian banks have joined hands to launch India’s first ever Blockchain based funding system for lending money to small and medium enterprises. The step is the call of the hour since SMEs in India have been plagued with defaulters.

Some of the top names among the 11 banks include ICICI, AXIS, HDFC, Kotak Mahindra, YES Bank, who are among the current participants while State Bank of India, Bank of Baroda and IndusInd are participating as outside members.

Abhijeet Singh, head of business technology at ICICI Bank, said,

“The idea of having such an organization is to remove any communication hurdle among the different banks. A blockchain network can only thrive if the entire ecosystem is working in synergy through a single network,”

Blockchain Infrastructure Company(BIC) Might Be The Technology Partner

The participating members on the project had been in talks with a company called Blockchain Infrastructure company(BIC) which might help the banks in creating a Blockchain network. The funding network based on blockchain aims to cut the time frame in the supply-chain financing, to make it more transparent and truly democratic.

The network would provide the lenders access to a public database of the SMEs applying for the funds. This would help the lenders to make a better decision and avoid any risk-based lending. The network once setup will eradicate previous hierarchical based databases between the corporate banks and SMEs, who used to make use of middlemen and bribing to get the loans and then flee away at the time of repaying.

The latest central bank data shows the outstanding credit of all commercial banks with the MSME sector as a percentage of the total outstanding corporate credit with banks is just 17.3 per cent.

Viral Acharya, RBI deputy governor explained the current problem, to a gathering of students at IIT Bombay, he said,

“Credit penetration is low for Micro, Small and Medium Enterprises (MSME) sector where the ticket size is generally believed to be between Rs 10 lakh and Rs 1 crore,”

Conclusion

Cryptocurrency might still be a raging topic on whether it should be regulated or not, but no one denies the potential of Blockchain technology that underpins it. This is the reason it is touted as the tool for the next industrial revolution.

Many developing and the developed nations have already invested resources to study different use cases and India is definitely at the front. Recently the Indian government has also announced its plans of finalizing the crypto regulatory reforms, giving a much-needed boost to the crypto enthusiast in the country.

Indian market can prove to be a game changer as well as the kingmaker for any new and upcoming technology or product and same holds true for the Blockchain based services and products. With 60% of its population in the youth age bracket, the boom is on the verge.