Ms. Sitharaman’s remarks on the utilization of blockchain technology by banks in India have been clarified by the government in Parliament. The Finance Minister, in a written response to Rajya Sabha, stated that there are currently no plans to establish a shared blockchain platform with guidelines for banks.
According to Ms. Sitharaman, only a limited number of banks in India have implemented blockchain technology on a small scale. Consequently, she noted that interoperability among banks is not a major concern. For those unfamiliar with the term, interoperability in blockchain technology refers to the ability of one blockchain to interact with others.
The Finance Minister informed the Upper House that a consortium of banks, named the Indian Banks’ Blockchain Infrastructure Company (IBBIC) Private Limited, is exploring the use of Distributed Ledger Technology (DLT) – blockchain being a distributed ledger – specifically for issuing domestic Letters of Credit (LC). This consortium comprises 18 prominent public and private sector banks in India.
Ms. Sitharaman highlighted that the purpose of incorporating the consortium is to create a platform for investigating, constructing, and implementing solutions based on Distributed Ledger Technology in the financial services sector.
While the adoption of blockchain technology in the Indian banking sector is in its early stages, the Reserve Bank of India has been discussing it for some time. The central bank has established a “Regulatory Sandbox” to facilitate the testing of innovative technologies, products, and services such as blockchain.