SIDBI Pilots Tokenized Collateral Network
The Small Industries Development Bank of India is a government-owned organisation that provides financial support to micro, small, and medium-sized firms (MSMEs) in India. SIDBI is critical to the development of India’s MSME sector, offering help through a variety of financial goods and services such as loans, guarantees, and venture capital.
SIDBI and Infosys have now teamed up to create a blockchain-based platform for India’s MSME sector. In an interview, Paramendra Tiwary, CTO at SIDBI, provided an update on a project that is still in its early stages but has the potential to dramatically impact the Indian economy.
While not a panacea and yet in its early stages, the application of blockchain technology in banking has the potential to eliminate vulnerabilities and reduce credit risk.
The SIDBI project aims to create a gold standard in institutional lending by creating a single source of truth for collateral information among borrowers. It requires Infosys to design a tokenized collateral network, which involves the creation of digital tokens representing physical assets issued on the distributed ledger. The tokens carry the rights of the assets represented, acting as a store of value. Custodianship of assets is an important role in tokenization transactions.
(With inputs from Shikha Singh)
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