Institute for Development and Research in Banking Technology (IDRBT), an arm of the Reserve Bank of India (RBI), recently revealed that it organized a workshop on blockchain technology aiming to prepare a white paper on implementation of the technology in the areas of banking and finance in India.

The working group included experts from the central bank, IBA, NPCI, CCIL, ISI, State Bank of India, Punjab National Bank, Bank of Baroda, ICICI Bank, HDFC Bank, Axis Bank, Citi Bank, Deutsche Bank, Infosys, TCS, IBM Research, Deloitte and MonetaGo. Last week, the institute released the white paper titled, “Application of Blockchain Technology to Banking and Financial Sector in India”.

According to the paper, the advantages of blockchain implementation in banking and finance includes cost savings, efficiency and transparency.

“Blockchain holds the potential for all participants in a business network to share a system of records which will provide consensus, provenance, immutability and finality around the transfer of assets within the business network. The reason blockchain can be potentially disruptive is that the distributed ledgers may lead to new business models and the existing processes could move away from a hub and spoke model with intermediaries”, it said.

IDRBT goes on to outline a prospective roadmap for the adoption of blockchain technology to banking and finance in India. This includes setting up of private blockchain by banks for internal purposes; interbank proof-of-concept implementation and testing in areas such as Know Your Customer (KYC), cross-border payments, syndication of loans, trade finance, and capital markets. It said:

“From a technological perspective, we feel that BCT [Blockchain technology] has matured enough and there is sufficient awareness among the stakeholders which makes this an appropriate time for initiating suitable efforts towards digitizing the Indian Rupee through BCT”.

IDRBT Proof-of-Concept

The institute has also attempted a Proof-of-Concept (PoC) on the applicability of blockchain technology to a trade finance application with active participation of NPCI, banks and solution provider. According to the white paper, the PoC was structured and customized to facilitate the feasibility analysis of blockchain technology for Indian banking and finance sector with two use cases that highlight banking and consumer interaction: Domestic Trade Finance with a sight letter of credit and 'Enhanced Information' payments (EIP).

“The architecture for the PoC required setting up a blockchain network that simulated 5 banks along with a regulated clearing authority for both use cases. Hyperledger Fabric is used as the underlying platform with the network having been configured and deployed on a cloud environment”, it said.