Money & Banking

RBI arm to test blockchain tech for digital transactions

KV Kurmanath Hyderabad | Updated on January 12, 2018 Published on January 05, 2017

Blockchain establishes a consensus over a decentralised, distributed network of stakeholders. Each communication is recorded in a continuum giving no scope to alter the thread. SHUTTERSTOCK

Will roll out apps for banking sector using the new tamper-proof tech

Blockchain is the in-thing in the technology world. It has taken the world of banking, finance and technology by storm.

A technology that promises tamper-proof ledger building as different stakeholders transact with each other digitally, blockchain is behind the success of bitcoins and the other digital currencies.

As the government promotes digital banking transactions post-demonetisation, Institute for Development and Research in Banking Technology (IDRBT), an RBI arm, is getting ready with a technology support framework to facilitate digital transactions in a tamper-proof way.

IDRBT will soon roll-out pilots to develop apps for banks to embrace blockchain.

The institute will work with volunteering banks to build applications for the banking sector. It will also build a small digital currency model using blockchain technology.

How it works

For starters, blockchain establishes a consensus over a decentralised, distributed network of stakeholders. Each communication is recorded in a continuum giving no scope to alter the thread. Premier technology research institutes, multinational banks and financial institutions have been working on pilot projects to test its application.

It takes fundamental tools from cryptology and data security to ensure message authentication for tamper-proof evidence. Besides preventing fraud, it saves on reconciliation cost between banks and prevents losses because of documentary frauds.

“This attribute means a lot for banking and financial transactions. Information has to flow as a chain. No one can change the flow of communication between different stakeholders. It is more transparent, secure and efficient,” AS Ramasastri, Director of IDRBT, told BusinessLine.

To begin with, the institute will build a trade finance solution with letter of credit, bill of landing and multi-signature solutions based on blockchain technology.

White paper released

The institute released a white paper on ‘Applications of Blockchain Technology to Banking and Financial Sector in India’ at the three-day ‘International Conference on Distributed Computing and Networking’ held here.

IDRBT roped in private and public sector banks, National Payments Corporation of India (NPCI) and took the help of IT majors such as Infosys, TCS and IBM Research to prepare the white paper.

The technology has huge scope in trade, banking, finance and revenue sectors. To give an analogy, if one applies for a home loan, it involves different arms within the banking system to process it, with each of them talking to one another.

In a sharp deviation from the central control, blockchain platform allows all stakeholders to play their part simultaneously. This distributed computing and networking would mean not only reduced time for processing but also enhanced security.

Published on January 05, 2017
null
This article is closed for comments.
Please Email the Editor