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Is Blockchain the Answer to Bank Frauds Like PNB-Nirav Modi Scam?

5 min read

The brand new bank scams are indubitably now not helping the usual man to non-public a factual night time sleep. Alternatively, with the rising point of curiosity on digitization of backend processes and the excitement around blockchain, would the banks’ accountability beef up?

In February, when the Punjab National Bank (PNB) scam came to gentle, most cribbed about every other businessman (Nirav Modi) looting the tax-payers money thru one amongst maybe the most trusted financial institutions. This used to be now not the major time. Within the previous too, identical scams had came about and now not regularly any lessons were realized.

If reality be told, in accordance with the Reserve Bank of India (RBI), over 23,000 cases of bank fraud, value Rs 1 lakh crore, had been reported in closing five years. Develop within the number of non-performing sources (NPAs) along with such fraud cases, elevate serious concerns concerning the health of the industry. Is there a technique to it? No longer but. Alternatively, if the banks initiate up minimizing human intervention in nearly all of their processes and beef up accountability, it might maybe maybe maybe maybe bring in some
reduction.

Within the hot times, adopting blockchain is one amongst the becoming suggestions
whereby the banks can beef up their accountability. The technology enables belief to be formed between extra than one stakeholders, by having records shared all the design in which thru a distributed ledger.

Giving an example, Chris Vincent, Mission Manager, Elemential Labs, says, imagine how Google sheets work as in comparison with the Excel. “In Excel, now we non-public the chance to edit after which send it all the design in which thru by email, etc. That is amazingly inefficient if extra than one amongst us are engaged on a particular file. On the diversified hand, Google sheet enables you to make a shared myth that might maybe also be accessed and edited simultaneously by extra than one stakeholders,” he shares, while adding, “That is what blockchain does for industry complications that exist resulting from records being kept in silos. You might maybe maybe maybe use this to make sooner credit ranking reports, within the cut value of instances of fraud and solve a broad number of complications.”

The Immense Deal
The technology is believed to non-public a substantial seemingly to resolve complications related to banks, as plenty of identical databases exist all the design in which thru organizations.
Santhosh Palavesh, Chief Improvements Officer, Belfrics Global, shares, “Suppliers, logistic firms, producers, retailers, insurance protection firms, banks, audit brokers, every person buy their individual myth, which creates alternatives for fraudulent activities. Hence, financial institute, tax department are in most cases puzzled by these records. If we are in a position to make a shared database, the set apart each and every transaction might maybe also be authenticated by relevant participants, there shall be appropriate receive admission to regulate and transactions shall be extra precise.”
It’s advanced to deem a world without banks; however, imagine it or now not, that’s the set apart the arena is headed. Chinmaya Sharma, Co-founder, Blockchain Semantics and Zeonlab, predicts, banks will resort to blockchain to express chances of such frauds going on all over again, it is miles best a matter of time.

“Blockchain takes away the total administration receive admission to, maintains an audit hurry of each and every transaction and ensures that the records as soon as added can never be edited or deleted. If best loan certificates (or LoAs/LoUs) were issued on a blockchain platform, frauds fancy Nirav Modi-PNB would never non-public came about,” said Sharma. 

He further elaborates, the guidelines of issuance of the letter of credit ranking will had been coded in a smooth contract and deployed on a blockchain platform, which can not be changed after being deployed. Additionally, it might maybe maybe maybe maybe had been nearly very now not going to cowl unauthorized certificates on the blockchain-enabled platform.

The set apart Are We Headed?
It’s a long way now not correct the blockchain firms which is more probably to be singing its praises, globally even banks are hopeful that the technology can aid solve out of date processes, apart from successfully managing and cancelling out NPAs and fraud cases. Nitin Chugh, Country Head – Digital Banking and Personal Liabilities, HDFC Bank, agrees that blockchain appears to be like to be one amongst these technologies that might maybe maybe provide an even bigger stage of safety and hence, it looks very promising. Furthermore, as in opposition to the accepted perception that Indian banks are now not prepared for blockchain, Chugh says, “It has nothing to entire with the present IT infrastructure. The blockchain is going to be a wholly new infrastructure, as one would characteristic on a extremely diversified platform. So, the lack of it or presence of this is in a position to maybe now not commerce too many things.”

In step with HDFC Bank, even Kotak Mahindra Bank is quite optimistic. It feels, there’s quite plenty of blockchain related alternatives, which is prepared to now not correct beef up the time of the commerce however also attach working capital, further bettering the effectivity of the total systematic structure and making improvements to the manufacturing cycle.

Sooner than jumping on to blockchain bandwagon, banks make a choice to contend with important complications related to technology, legality and most considerably mindset. “For blockchain to work, we would desire banks, which in most cases work on extra than one alternate suggestions, come to a resolution on a single system, at any given point. Whereas on the diversified facet, our authorized pointers make a choice to evolve. Even though initiatives had been undertaken at the international stage, it is miles equally important for international locations fancy India to non-public authorized pointers in area,” shares Shekhar Bhandari, Senior Executive Vice President and Industry Head – Global Transaction Services and Treasured Metals.

Whereas on the diversified facet, Indian regulators, who are continuously conservative in nature, are also taking cognizant of technological transformations coming in. Even the RBI is working with the consortium of banks along with Infosys-led Edgeverve to clutch how blockchain might maybe also be conducted in securities and commerce finance verticals. As a couple of the banks are engaged on their pilot undertaking, in a year or maybe two, we’ll watch some major adoption. As Sudin Baraokar, Head- Innovation, Speak Bank of India beforehand said, by 2030, out of date bank services might maybe maybe maybe quit to exist. So, the banks that will try to face up to the technology will at closing drop out.

(This text used to be first printed within the June pain of Entrepreneur Magazine. To subscribe, click here)