MUMBAI: Kotak Mahindra Bank on Tuesday said its blockchain solution has cut trade financing time to a couple of hours from over 30 days. The bank has partnered with consulting firm Deloitte and JP Morgan Singapore to use the blockchain technology for completing the crucial process of issuing a Letter of Credit (LC) to prospective borrowers.
“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,” said K V S Manian, President, Corporate, Investment and Institutional Banking, Kotak.
Blockchain solution is a distributed database that maintains a continuously-growing list of ordered records called blocks. Other Indian lenders, including ICICI Bank, Yes Bank and Axis Bank have previously disclosed using the blockchain technology in their operations.
He added that Indian banks were experimenting with blockchain applications in various areas including paper-intensive processes of trade finance and supply chain financing segments, which are ripe for disruption.
“This transaction is the beginning of a journey on integrating Blockchain and moving towards full-scale adoption, thus giving Indian importers, exporters and domestic traders, the best solution,” he said.
LC, a negotiable instrument, is a critical document in both domestic and international trade finance and also one of the most tedious documents to process in banking. The time involved in completing the process deprives exporters from utilising their sale proceeds efficiently.
The verifying, approving and documenting process takes time given that multiple parties from different countries with varied regulatory frameworks are involved in the process.