The move comes after the central bank’s technology arm the Institute for Development and Research in Banking Technology (IDRBT) released a white paper earlier this month saying its pilot, for a blockchain platform to settle trade finance transactions, had been successful.
The banks involved in the larger pilot, including State Bank of India, are working with New York-based startup MonetaGo, which will provide the platform. MonetaGo was also the technology provider in IDRBT’s pilot.
“We are going to be starting a pilot with about 15 of India’s largest banks to test out the platform. The banks have been working on their own blockchain pilots. But this will create a platform that everyone will build on,” Jesse Chenard, CEO of MonetaGo, told ET. He declined to name all the members in the consortium, saying there would be a larger announcement when the pilot officially started. However, he said that the banks involved were responsible for over 80% of all transactions in the country.
Blockchain — which uses a distributed system for recording transactions called hyperledger — would help allow the banks to settle transactions more efficiently.
Unlike existing technology systems in which a bank maintains its own database, a blockchain system would allow banks to maintain a copy of the transactions. As they occur, the system would update all the records simultaneously, removing the need to reconcile transactions between different banks.
Chenard said his platform integrates with the banks’ existing technology systems, making it easier for banks to adopt the platform. He said the pilot would cost a bank a fraction of a million dollars.
“Once this becomes a working consortium model, banks that put in more servers and computing would be paid back by the banks that are using the technology,” Chenard said. He added that he expects the pilot to last about nine to twelve months.
“In about six months, the platform will get set up and get into production. Then, we think it could take three months or so to share the data and talk to the different governing bodies,” said Chenard.
MonetaGo is part of IDRBT’s working group on blockchain technologies. The group includes the top Indian banks and technology firms such as Tata Consultancy Services, Infosys and IBM Research and MonetaGo. The group released a white paper of the pilot for the first blockchain which involved trade finance.
“It is not that IDRBT chose trade finance or MonetaGo as the sole application or sole partner for the proof-of-concept. Both emerged as part of deliberations of the working group and for an immediate PoC. As of now, the white paper is for circulation among all stakeholders,” Dr A S Ramasastri, director of the IDRBT, told ETin an email.
Indian financial institutions have been experimenting with different aspects of the blockchain.
ICICI, Yes Bank and Axis Bank are some of those who have talked about their moves to use the technology. The Mahindra Group has tied up with IBM to use blockchain to improve its supply chain finance business.
Late last year, the National Stock Exchange also conducted a fiveday pilot on the technology.