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Indian Kotak Mahindra Bank launches end-to-end blockchain-based trade financing

With more countries embracing blockchain technology, India is emerging in testing the nascent technology in various sectors. Indian banks are performing blockchain pilots to test its potentials in various domains.

Kotak Mahindra Bank, one of India’s leading private sector lender, has enabled end-to-end blockchain-based trade financing for one of its clients, Economic Times, reported.

The blockchain trade financing operation aims to reduce the time taken for a letter of credit (LC) to few hours from 20 to 30 days. These LC’s are a negotiable instrument and critical document in domestic as well as international trade finance.

Usually, the time taken is more in traditional method for verifying, approving and documenting process of LC, given that multiple parties from various countries with varied regulatory frameworks are involved in the process. The blockchain technology not only curbs the time involved and eliminates duplicity of data but also integrates data to a central cloud-based access system for participants in a transaction.

“In an evolving digital ecosystem, while instant money transfers have progressed significantly, trade finance in India has a lot of catching up to do. 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,” KVS Manian, president, corporate institutional and investment banking at Kotak Mahindra Bank, stated.

The bank has joined a host of financial institutions both in India and globally, exploring various blockchain applications such as trade finance, cross border payments, trade settlements, FX settlements, commodities exchange, audit & regulatory reporting, among others.

The bank stated that it is viewing a future where banks will collaborate and participate on blockchain consortium which will help improve operational efficiency, reduce risk of fraud and improve the customer experience in key offerings like KYC, cross border payments, imports/exports finance, supply chain finance, among others.

Last October, Indian private banking giant ICICI Bank partnered with UAE’s leading banking group Emirates NBD and Infosys Finacle in order to complete blockchain-based transactions in international trade finance and remittances. Later in January, YES Bank implemented multi-nodal blockchain solution to completely digitize vendor financing for Bajaj Electricals and days later, Axis Bank leveraged blockchain for cross-border remittances with its partnership with Ripple blockchain provider.

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2.9 mln

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