Indian Central Banks to Use Blockchain Tech for Stopping Fraud

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As per a report by the Economic Times, the Reserve Bank of India (RBI) is planning to work on a blockchain-based project, along with many other prestigious banks. The project under consideration will focus on trade financing and would be the first major project by the central Indian institutions that use blockchain technology.

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Indian Central Bank to Curb Frauds Using Blockchain

The project intends to develop a mechanism that’ll prevent scammers from performing fraudulent activities. Frauds committed by Nirav Modi and Mehul Choksi are a typical example of the same, where the parties involved were accused of having committed a fraud of more than a billion dollars by obtaining credit from the PNB in a fraudulent manner.

The pilot project will be called proof of concept and will help improve the traceability of money flow using blockchain technology.

Blockchain technology is particularly helpful in this regard because the underlying mechanism is essentially a ledger- meant to keep an accurate record of things(generally transactions). And naturally, the better the record, the better the traceability of any transaction under record.

Tackling alteration of documents, like Letters of Credit (LC), will be the primary focus of this initiative. These digital documents can help prevent frauds involving millions of dollars, like the ones mentioned above.

An official person involved in the project has said “The pilot has begun with the banks to run blockchain-based systems to issue digital LCs.”

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Central Bank of India to Take Help from Tech Companies

The initiative headed by RBI Innovation Hub will receive technical assistance from three technological companies, namely SettleMint from Belgium, Corda Technologies from the US, and IBM. Multiple banks have joined hands by involving themselves in the initiative as well, including HDFC Bank, ICICI Bank, State Bank of India, Union Bank of India, Axis Bank, and Bank of Baroda.

The goal of this initiative is to make the blockchain technology an important part of the Core Banking system. And before it becomes an integral tool, it’s important to assess the benefits of the application of the technology. “This is to assess how blockchain can facilitate and secure our banking system,” said an individual involved in the project.

Indian Government and Its Relations with Crypto

Cryptocurrencies in particular haven’t exactly received a lot of admiration from the Indian government. The recent imposition of taxes on the currencies has led to a major lack of enthusiasm among investors, concerning crypto. It’s soon to become even more severe, as the Indian council is expected to impose an additional 28% tax on the pre-existing 30% tax, in a meeting to be conducted next week.

However, the tech that supports cryptocurrencies, has impressed the Indian government pretty successfully. Governor Shaktikanta Das has been known to say that for blockchain technologies to thrive, crypto is not essential.

The imposition of heavy taxes and the effort to adopt blockchain technology in traditional systems considerably vouches for the respective attitude the Indian Government has toward both Cryptocurrencies and Blockchain Technology.

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For now, the involvement of major banks and technology companies are enough to make an argument that- blockchain technology isn’t entirely ignored by the government. And the project can witness mass-scale adoption if it succeeds.

If it does, the blockchain industry is in for a big win.

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