Eleven Indian banks have joined an initiative that may change the way small businesses obtain loans, via blockchain. The blockchain-linked loan system will focus on small and medium enterprises and aims to remove communication barriers between India’s largest banking providers.

A consortium of India’s eleven largest banks launched the first ever blockchain-linked loan system in the country.

Abhijeet Singh, head of business technology at ICICI Bank, said that the goal of the consortium is to remove communication problems between banks:

“A blockchain network can only thrive if the entire ecosystem is working in synergy through a single network.”

Representatives from some of the largest banks in India have been working on setting up a live network that will make supply-chain financing more efficient and secure. Singh said that the core objective of the blockchain-based network they are developing is to ensure greater transparency in credit disbursement.

The network will reportedly enable big lenders to access public credit data, which would remove much of the risk associated with the lending process. Such a system will also remove the information hierarchies between large financial corporation and SME loan providers.

Akhil Handa, head of fintech and new business initiatives at the Bank of Baroda, said that every supply-chain player often has an incompatible technology stack and differing levels of technical competence, which makes the entire process time-consuming:

“A common blockchain network harmonizes the requirements and lets everyone see the flow of the trade on a single platform,” he explained.

Banks participating in the funding include ICICI Bank, Kotak Mahindra Bank, HDFC Bank, Yes Bank, Standard Chartered Bank, RBL Bank, South Indian Bank, and Axis Bank.

Apart from the eleven main members of the consortium, three banks are participating by funding the initiative as outside members—IndusInd Bank, State Bank of India and Bank of Baroda. The Blockchain Infrastructure Company (BIC), a consortium based in India, is organizing the meetings between the participating banks.

Leveraging distributed ledger technology makes sense both for the providers and consumers—banks will be able to attract more small and medium enterprises into the formal credit system, while businesses could benefit through potential cost reductions and lower settlement times.

As the technology matures, financial companies, supply chains, and data custodians are starting to take notice and leverage the new database structure. Despite the critics, it appears that blockchains are starting to demonstrate tangible, real-world use.

The post Consortium of 11 Indian Banks Launch Blockchain-Linked Funding for Small Businesses appeared first on CryptoSlate.

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