Reliance Industries (RIL) Gets Overseas Payment From HSBC Using. Blockchain Technology
Blockchain and its use case scenarios are having a gala time as the decentralized technology is gaining more and more traction. Marking its first in India in the financial sector, the Indian commercial giant, Reliance Industries (RIL) executed trade finance transaction involving an export via a British banking major HSBC to an American client using the blockchain technology.
The blockchain-enabled letter of credit transaction facilitated a shipment between Reliance and the US-based Tricon Energy. Using the blockchain has marginally reduced the time taken for document processing and the subsequent transaction. A joint statement issued by HSBC India and Reliance quoted the RIL joint chief financial officer Srikanth Venkatachari:
“The use of blockchain offers significant potential to reduce the timelines involved in the exchange of export documentation from the extant seven-ten days to less than a day.”
Integrated with an electronic bill of lading (eBL), the blockchain platform enabled managing and issuing an electronic bill of lading. This allows a digital transfer of the title of goods from the seller to the buyer in the underlying trade. According to the statement, this method is a considerable update for organisations that are involved in buying and selling goods internationally as all the parties are present at one platform.
Basically, Blockchain solutions enable a distributed database that maintains a list of ordered records called blocks. The overall process is touted to be very transparent and all the parties involved can view progress in real time. The domestic lenders, including ICICI Bank, SBI and Yes Bank among others have been using the blockchain solutions and have vouched for the technological capability of blockchain to cut time and to maintain transparency.
The Head of global banking and markets, HSBC, Hitendra Dave noted that blockchain can bring a transformation on trade finance transactions by making it simpler, faster and secure. He pointed some other qualities as well, such as the quicker turnaround, cost-effectiveness and the potential of unlocking liquidity for businesses.
The statement said that this particular transaction between Reliance and Tricon, the LC was issued by ING Bank, Brussels for Tricon Energy US with HSBC India as the advising and negotiating bank for Reliance. It further claimed that the transaction validates the commercial and operational viability of blockchain as an alternative to conventional exchanges for paper-based documentation.
The current system involves buyers and sellers utilizing paper-based LCs to underpin transactions. The physical documents are sent to each party in the transaction by post, courier or fax. While this system provides a high level of certainty, the time and cost involved in processing the documents are deterrents for exporters.
According to HSBC, they along with five other banks globally supporting the ‘Corda application’, is seeking to expand the network on an open source basis to drive adoption across the industry.
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