Blockchain developer Settlemint, IBM and R3 are amongst several companies working on an Indian blockchain trade finance solution, according to a report in the Economic Times. The Reserve Bank of India and almost a dozen banks are involved in the pilot, including HDFC Bank, ICICI Bank and State Bank of India.
Blockchain will be used to issue Letters of Credit (LCs) to reduce the risk of fraud. A letter of credit involves a promise by the buyer’s bank to pay the seller, usually for a large shipment.
One example of fraud is if the buyer creates a fictitious letter of credit that their bank didn’t actually issue. Hence the seller sends the goods but ends up not getting paid. A blockchain solution can easily verify the authenticity of the letter of credit.
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