BLOCKCHAIN IN FINTECH

A Presentation by
Sivanand Kolluri
 The concept of blockchain
• Block chain is the digital information (the “block”) stored in a public
database (the “chain”).
• A digitally distributed ledger system that records an asset's movement
and ensures point-to-point tracking of information on transactions.
• It is a decentralized system, hence is transparent.
• Decentralization ensures the amount of control that a single authority
has in the process, hence reducing the possibility of scams.
• The use of tools like “smart contracts” help in automating manual
processes.
• Why is the banking sector interested in blockchain?
It also enables them to track documentation and authenticate ownership of assets
digitally, as an un-alterable ledger in real time.

• Is it safe?
Blockchain integrated with CBS using crytography secures the transaction.

• How does blockchain store data?

The information is packaged into blocks, which link to form a chain with other
blocks of similar information.
Possible implementation of Blockchain

Banking industry

Anti money laundering

Insurance industry

Cross border payments

Clearing and settlement

Trade financing
 What happened at PNB?
‘There was a progression of unscrupulous practices at each level of LoU
making, which brought about a ₹12,000 crore Ponzi scam.’

• N.Modi approached PNB for an LoU to pay back traders overseas.

• Senior Managers approved the LoU without proper collaterals.
• A message was sent to the overseas banks through SWIFT that an LoU was issued.
• A three stage process of LoU making was completed and was fed into the CBS.
• LoC sent by the overseas bank isn’t evident in the records.
• The overseas bank credited the NOSTRO a/c for 90 days against the LoU.
• The trader gets paid.
 How did the government react
• Fugitive Economic Offenders Bill
The bill helps the government to seize both the local and overseas assets of
alleged offenders and the person who escapes to other countries to avoid arrest.

• National Financial Reporting Authority

Regulation of audits for large companies by independent regulators to oversee the
audit professionals, for improved quality of audits, and hence the confidence of
the public and investors.

• Mandatory passport details for loans more than Rs 50 crores

Detain defaulters from leaving the country. Mandatory for those who apply for a
loan amount greater than 50 crores.
 How blockchain can stop feature
Nirav Modis
• Smart contract is a program capable of digitally facilitating, verifying or enforcing
the negotiation or performance of a contract.
• Issuance of fake LoUs would not have been possible on blockchain as the smart
contract would have identified inconsistencies based on automatic reconciliation
with core banking.
• If the core banking system is integrated with blockchain, wilful defaulters and
clients breaching individual or group borrowing limits can be immediately
identified.
THANK YOU