It was recently reported that the Kotak Mahindra Bank, an Indian private sector bank headquartered in Mumbai, has finally completed the process of introducing its blockchain solution technology to reduce time in trade financing. The bank reported that there has been a huge reduction in the time of the process with end-to-end trade finance transaction by using blockchain technology to issue the letter of credit (LC). The new technology takes only a couple of hours to finish the process as compared to the old process which used to take around 20 to 30 days.
Kotak Mahindra partnered with the consulting firm Deloitte and one of the largest banking institutes of the world, JP Morgan Singapore to enable the blockchain technology for the completion of the end-to-end transaction process.
Banking experts said that LC is a negotiable instrument which is a critical document in both domestic and international trade finance. It is also considered to be one of the most vital documents to process in banking. The time involved in completing the process deprives exporters of utilizing their sale proceeds efficiently.
The President of Corporate, Investment and Institutional Banking of Kotak Mahindra Bank, K V S Manian said that while the procedure of instant money transfer has progressed significantly, the trade finance in India requires a lot more development. He even mentioned that blockchain technology is a matter of great interest in the financial industry services. The President added, “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.”
Manian added to the conversation and said, “In the Indian context, banks are experimenting with blockchain applications in various areas of transaction journeys and processes, including paper intensive processes of Trade Finance and Supply Chain financing segments, which are ripe for disruption. Our proof of concept transaction will change the narrative here on. We are leveraging this technology to give our clients hassle-free and profitable trades finance solution on an almost real-time basis.”
Reports have suggested that the bank is investing heavily in its technological improvements to develop it blockchain technology to give Indian importers and exporters and domestic traders the best solution. The bank officials reported that they visualize on a future where the financial institutes will collaborate and participate in the blockchain community so as to improve the operational efficiency and reduce the risk of fraud and improve the customer experience in the key offerings through cross-border payments, import-export finance, Know Your Client (KYC), Supply Chain Finance, Syndicated Loans and Regulatory Audit Reporting.