India is tapping blockchain technology for overseas payments

India is tapping blockchain technology for overseas payments
Photo: REUTERS (Reuters)
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The Reserve Bank of India (RBI) is deploying blockchain technology for smoother payments across borders.

Open Financial Technologies, a Bengaluru-based neo-banking company, has been given the nod for its new product that will ensure tamper-proof monitoring of transactions, the RBI said in a July 19 release (pdf).

The product is based on open-source blockchain technology and will allow the parties involved to keep track of any transaction at every stage.

“...when the payment is happening there is also a ledger that records where the payment is at every point in time. So, immutability is brought into the whole transaction, whereby no transaction is ever lost from the system,” Anish Achuthan, co-founder and CEO of Open Financial Technologies, told Mint newspaper.

Starting with the US-India corridor, the company will offer the product to financial institutions globally through an enterprise banking tool called BankingStack. More broadly, it will enable lenders to launch digital banking solutions in a span of weeks.

“ look(ing) forward to scaling the solution by working closely with banks to offer a suite of products for cross-border payments and trade finance which will benefit millions of SMEs in India,” said Achuthan.

RBI’s rupee-settlement gateway

Open Financial Technologies is one of the four entities that have completed RBI’s live testing of new products or services for cross-border payments in a controlled regulatory environment.

The approval its product has received has come amid a dollar crisis in global financial markets, which has prompted Indian exporters to opt for letters of credit (LC) for minimal risk and surety of payment.

“The RBI’s move...will help exporters and importers pave the way for trading and settlement of transactions in Indian rupee,” Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations told Bloomberg Prime.