Eleven Indian banks have come together to launch the country’s first blockchain-backed funding platform. The new blockchain platform aims to eliminate lending and financing challenges for Small and Medium-sized Enterprises (SMEs). The initiative has been tasked to a committee comprising the country’s second-biggest lender Kotak Mahindra Bank and other major institutions including ICICI Bank, Yes Bank, Standard Chartered Bank, RBL Bank, and South Indian Bank.

The meeting between the 11 banks was set up by the Blockchain Infrastructure Company. The biggest lenders of the country discussed the need for a unified platform that removes communication hurdles between banks, so that SMEs can more easily raise funds.

The platform will bring together stakeholders like supply-chain players, banks, and logistics partners to harmonize the lending landscape. It also focuses on bringing transparency to existing lending mechanisms.

Abhijeet Singh, the head of business technology at ICICI Bank, stated that such a platform will expedite supply-chain financing and bring transparency to credit disbursement. According to Viral Acharya, Deputy Governor of Reserve Bank of India, credit penetration for MSMEs, or Micro, Small and Medium Enterprises, is very low. As the lending ticket size ranges from $14,000 to $140,000, MSMEs tend to find alternative financing options.

The platform would provide lenders access to public credit data to make more informed and judicious lending decisions.

Though the Indian government has been hostile towards cryptocurrencies, with governance bodies delaying crypto regulations, it has embraced blockchain technology in many pilot projects.

IndiaChain was initiated by the government of India to allow private bodies and state organizations to build payment apps and other tools. Following the Reserve Bank of India’s ban on cryptocurrency trading, Kotak Mahinda Bank has blocked the private accounts of cryptocurrency users. However, this initiative is a clear indicator that Indian authorities are realizing the potential of blockchain technology.