In a first-ever instance of Blockchain usage in trade finance in India: Reliance Industries (RIL) to process its export commitment to Tricon Energy, one of its US-based Client used HSBC (India)-engineered Letter of Credit (LoC) deploying electronic Bill of Lading (eBL) platform Bolero to benchmark the country’s adoption of disruptive decentralized ledger technology in domestic and cross-border transactions.
The reason for this swift jump to the new age technology platform was for the strategic advantages it holds for the stakeholders – time and costs of documentation for completing the process.
It is expected that this example of seamless blockchain use and the inherent benefits that corporate and individual businesses can target will drive adoption of blockchain-driven platforms in India. The country is lagging behind in transiting to this transaction mode since the use of blockchain-LoCs, eBL is in advanced stages of adoption in digital-first economies in the Middle East and APEC nations.
Why was Blockchain-LoC used?
The financial transaction on behalf of RIL, which is India’s largest holding companies with a vertical presence in oil and gas production, media, and telecom, to handle it’s export to US-based energy client has lessons for the Indian export sector.
Exports are complex transactions, one of which is for banks to issue Letter Of Credit for the consignment to reach the importer, apart from a process called a bill of lading or (BL). The complexity of these processes involving multiple parties and sometimes government regulatory bodies for their approval is time-consuming and costly.
One of the first areas where blockchain was used in transactional finance was in digitizing the Bill of Lading or eBL and is offered by several service providers.
HSBC, BNP Paribas, Standard Chartered are some of the global banks investing in blockchain platforms to drive cross-border transactions.
What is eBL and Bolero Platform?
The blockchain is essentially a technology which uses computing power to document transactions transparently and is also often called Decentralized Ledger Technology. Since every transaction is recorded and can be seen publicly, there is no room for ‘mutation’ of transactions and is thus a hot favorite for every type of ledger-keeping business from logistics and supply industries to pharmaceuticals patenting their innovation.
Bolero is a blockchain eBL services provider, offering its services since November 2016. The system developed by this platform allows issue and management of e-form bill of lading and is integrated with digital transfer of goods, titles involving buyers and sellers in any given trade.
Impact of Bolero and Blockchain for India
According to one of the first executives in India to be involved in a blockchain export order completion, Chief Financial Officer of RIL, Srikanth Venkatachari shared that this system holds the immense potential of application in finance and trade transactions. He believes that the ability of such transaction processes to lower time, centrally manage all the export documentation would be a boon since it takes nearly seven to ten days for such processes to be completed in traditional methods. Bolero-based blockchain eBL and eLoC took a single day for RIL and HSBC to be completed.