Over the past three years, India’s banking sector has been impacted by fraudulent loans and vulnerabilities in the institutions’ internal controls. With the advent of blockchain technology, banks will surely find relief in its distributed ledger system which guarantees transparency and efficiency.
According to CBInsights, blockchain technology provides a way for untrusted parties to come to an agreement on the state of a database, without using a middleman. It provides a ledger that nobody administers. Basically, a blockchain technology uses distributed databases and cryptography to record transactions in an ever-growing system of interlinked records or ‘blocks’ all synced with identical information. Experts applaud blockchain because it functions as an open, decentralized ledger that effectively keeps track of transactions between two parties in a permanent and verifiable way.
The Indian Banking Sector is not ignorant to blockchain technology. The Institute for Development and Research in Banking Technology (IDRBT) of Reserve Bank of India (RBI) has been working extensively with the government and banks to develop a blockchain network which could be used as a common platform to deploy a number of banking applications. Earlier this year, the IDRBT unveiled a blueprint which includes a broad roadmap outlining the implementation of distributed ledger technology (DLT) in various organizational and business structures. Blockchain technology benefits the people a lot more, in terms of no fees and security, than the banks. Karim Iskandar, Commercial Director at BookingBug, says the new technology offers ease in money transfers. Iskandar said that currently, transferring money is time consuming and often requires financial intermediaries. “Blockchain reduces the number of middlemen while increasing security, which could reduce industry-wide transaction and processing costs by billions.” However, this reduction comes at the cost of eroding traditional roles within the financial industry. Iskandar said blockchain leads to greater trust between trade partners due to their access to shared, trustworthy records and the technology’s strong security features. “This, along with real-time transactions, will increase the velocity of money and in turn cash flow and capital investments.
Related Article:Perils of gender based violence and harassment on social media
Besides, banks and financial institutions can benefit from the technology’s fraud detection. It prevents hacking. Customers can take advantage of faster payments, that is, they can send and receive payments in the form of digital money, called cryptocurrencies like Bitcoin. However, the RBI and the government are still now comfortable with the concept of cryptocurrencies. Though digital transactions are welcomed, digital currencies will take the authorities decades to give the nod. There has to be more awareness and open mindedness as industries and institutions are to sleek smartphones and artificial technology (AI).