Hopefully you have followed our story on Blockchain in Part 1, Part 2 and Part3. In our last communiqué we spoke about key summary outcomes/ recommendations of the RBI appointed, IDRBT led blockchain POC in India. One of the important points, the whitepaper raised, was on utility of consortium. We did not highlight it earlier, as we wanted to hear some next steps and that next steps news has just started to come in.
In one of our tweet (Randomwalksin), we mentioned that the blockchain technology utility works best/ provides best benefits in a multi-variate, multi-stakeholder & multi-geography kind of scenario because of existing inefficiency of current processes and financial risks that comes in such a scenario. The consortium may be able to address this as the major banks/ financial services companies becomes part of it. The concept is thought not new as we know of R3CEV established in 2014 which boasts of >70 members, Digital Asset Holdings (Goldman & Banco Santander joined it after exiting R3 very recently), Post Trade Distributed Ledger group (UK), Chinaledger alliance (China), Japan bank consortium (Japan). The primary intentions of these consortiums are to pool in multiple players and leverage that to develop & innovate in distributed ledger based solutions. India, till date, does not have such a consortium.
IDRBT whitepaper on BCT (blockchain technology) highlights the lack of above and also suggests a consortium approach where multiple banks become part of it. The suggestions also takes the concept to a much different level as it is not expected to just develop/ popularize distributed ledger for consumption by members/ banks but also provide a collaboration based approach among member banks to make the ‘use cases’ stronger. For example let me quote a few from the IDRBT whitepaper:
- “… enable them to monitor money movement and perform the desired analytics thereon to detect anomalies as per the mutually agreed rules and patterns”
- “…assist the participating banks/institutions to have better visibility of the use of loan money provided to corporate by tracking the movement of funds”. This should ring a bell in the current context of misappropriation of funds by Mr. Mallya (IDBI case). BCT technology would have prevented much of it as other members could have had visibility as the funding was more of a consortium in nature, overall.
- KYC compliance in a centralized approach with KYC ledger providing a historical record
The whitepaper also highlighted why it may-be a good step to first start with a use case of BCT applied in an interbank scenario and then take it further. Refer to Part 2.
As per the report, SBI, Moneago (BCT technology partner) and 14 other large banks (yet unnamed but can be guessed mostly) are expected to be part of the consortium to test an interbank use case of blockchain/ distributed ledger (in more specifics). This seems to be in accordance to the phase wise approach as outlined by IDRBT and also addresses the key use cases they highlighted and what we mentioned in earlier points 1 to 3. Such a consortium also helps in one more critical aspect, creating a common database.
With respect to timelines, probably next 9-12 months will go in getting this somewhere close to ‘ready for launch’ and then obviously the approvals etc has to kick in and then we can see some more actions heating up the BCT space in India. Keep following us for more on this as we keep tracking BCT development in India.
IDRBT BCT Whitepaper