Blockchain cant stop Indian bank frauds

Indian Frauds

The recent bank scams are surely not helping the common man to have a good night’s sleep. However, with the growing focus on digitization of backend processes and the buzz around blockchain, would the banks’ accountability improve?

In February, when the Punjab National Bank (PNB) scam came to light, most cribbed about another businessman (Nirav Modi) looting. The tax-payers money through one of the most trusted financial institutions. This was not the first time. In the past, too similar scams had happen and hardly any lessons were learn.

In fact, according to the Reserve Bank of India (RBI). Over 23,000 cases of bank fraud, worth Rs 1 lakh crore, have been report in the last five years. An increase in the number of non-performing assets (NPAs) along. With such fraud cases, raise serious concerns about the health of the industry. Is there a solution to it? Not yet. However, if the banks start minimizing human intervention. In the majority of their processes and improve accountability, it might bring in some

In recent times, adopting blockchain is one of the best ways
through which the banks can improve their accountability. The technology enables the trust to be form between multiple stakeholders, by having data share across a distribute ledger.

Giving an example, Chris Vincent, Project Manager, Elemental Labs. Says, think about how Google sheets work as compared to the Excel. “In Excel, we have the opportunity to edit and then send it across via email, etc. This is very inefficient if multiple people are working on a particular file. On the other hand, Google sheet allows you to create a share document. That can be access and edit simultaneously by multiple stakeholders,” he shares, while adding. “This is what blockchain does for business problems that exist due to information being store in silos. You could use this to create faster credit reports, reduce instances of fraud and solve a wide variety of problems.”

The Big Deal

The technology is believe to have a tremendous potential to solve issues related to banks, as several similar databases exist across organizations.
Santhosh Palavesh, Chief Innovations Officer, Belfrics Global, shares, “Suppliers, logistic companies, producers, retailers, insurance companies, banks, audit agents, everyone maintain their individual record, which creates opportunities for fraudulent activities.

Hence, financial institutes, tax department are often puzzle with these records. If we can create a share database, where every transaction can be authenticate by relevant participants, there will be appropriate access control and transactions will be more secure.”
It is difficult to imagine a world without banks; but, believe it or not, that’s where the world is head. Chinmaya Sharma, Co-founder, Blockchain Semantics and Zeon lab, predicts, banks will resort to blockchain to negate chances of such frauds happening again, it is only a matter of time.

“Blockchain takes away all the administration access, maintains an audit trail of every transaction and ensures that the records once add can never be edit or delete. If only loan certificates (or LoAs/LoUs) were issued on a blockchain platform, frauds like Nirav Modi-PNB would never have happen,” said Sharma. 

He further elaborates, the rules of issuance of the letter of credit could have been code in a smart contract and deployed on a blockchain platform, which cannot be change after being deploy. Additionally, it would have been almost impossible to hide unauthorized certificates on the blockchain-enabled platform.