Infosys has formed a blockchain-based trade finance network with seven private-sector banks, to increase security and efficiency in the banking sector while also broadening its product offering, Reuters reported.
Infosys reported revenue of Rs 18,083 crore (+5.6 percent) with operating profit of Rs 4,472 crore (+6.2 percent) for the quarter ended March 31, 2018.
India’s second-biggest software services exporter, whose Finacle software powers the core functions of the majority of Indian lenders, is in talks to sign up more domestic and foreign banks to the network.
Blockchain technology allows transactions to be securely shared between network members, as opposed to each bank working independently which is more expensive and increases the chance of error.
HSBC Holdings performed the world’s first trade finance transaction using a shared blockchain platform, in a push to boost efficiency in the multi-trillion-dollar trade finance segment.
Infosys is setting up its trade finance network in a banking sector rattled by an over $2 billion fraud at India’s second-biggest state-run lender, Punjab National Bank (PNB), allegedly by two jeweller groups with help from rogue bank staff.
The jewellers have been accused of raising credit from Indian banks’ overseas branches using fake trade finance guarantees provided by PNB staff in Mumbai who did not enter those guarantees in the bank’s computer system.
“Infosys’ network will make transactions transparent for the buyers, the sellers, the buyer’s bank, the seller’s bank and any regulator who is on this network,” said Rajashekara Maiya, Finacle global head of product strategy.
In March, India’s central bank barred all lenders from issuing letters of undertaking – a form of credit guarantee at the heart of the PNB fraud.
Banks can continue issuing letters of credit and bank guarantees. The instruments are among the various forms of trade finance that importers use to fund overseas purchases.
Sanat Rao, chief business officer at Finacle, said lenders currently testing its trade finance network are ICICI Bank, Axis Bank, Kotak Mahindra Bank, Yes Bank, IndusInd Bank, RBL Bank and South Indian Bank.
Infosys is also in talks with other Indian and overseas lenders.