Two private sector lenders, Axis Bank Ltd and Kotak Mahindra Bank Ltd, are conducting pilot transactions. They are experimenting in various business segments, to establish whether there is a business model for blockchain in India.

“We are theoretically convinced that blockchain is the way ahead. But we have to establish a practical use of the technology. As of now, the focus is on whether the technology is scalable in the near future,” said Deepak Sharma, chief digital officer, Kotak Mahindra Bank.

According to Sharma, Kotak Mahindra Bank is currently conducting pilot transactions in cross-border remittances and trade settlements, using blockchain. The bank is also working with some international banks and a technology provider for these pilots, Sharma added.

“Typically, cross-border remittances take two days to settle. Using blockchain, we can reduce this time to a few minutes, which will save us a lot of time,” he said.

Axis Bank believes that it would successfully conduct full-fledged transactions, before it comes out with a product in the market. The bank is examining scenarios in businesses involving foreign exchange and in some other corporate banking operations, according to Amit Sethi, chief information officer.

“While we believe there might be some use of blockchain technology in the retail businesses, we think that it will first come out in the corporate banking operations. Cost and the speed of transactions will be key differentiators, but the efficiency and ease of conducting transactions will also matter,” Sethi said.

“We will come out with solutions for our customers soon, but we don’t want to commit to any time frame,” Sethi added.

HDFC Bank, India’s largest private sector bank by asset value, is still assessing the opportunity, a spokesperson said, without getting into details.

Blockchain is a decentralized ledger, which allows all stakeholders to receive instant information regarding the state of transactions across various stages. This typically comes in handy when tracking complex financial transactions where there are multiple points of entry and exit for the funds involved.

Currently, this information has to be sought manually from each person involved and there are high chances of duplication of data. Blockchain eliminates the need for such inquiries. Globally, multiple banks are trying to use this technology to see whether they have any use for it in their respective businesses.

The Reserve Bank of India (RBI) does not have any regulations about blockchain.

The pilot transaction at ICICI Bank was executed to showcase confirmation of import of shredded steel melting scrap by a Mumbai-based export-import firm from a Dubai-based supplier, the bank had said in a statement on Wednesday.

The second initiative involved a transaction on the blockchain application that enabled an ICICI Bank branch in Mumbai to remit funds to an Emirates NBD branch in Dubai in real time.

According to Vivek Belgavi, partner, financial services–fintech and technology consulting leader, PwC India, two definite trends are emerging in the blockchain space in India. First is where banks are trying to see if blockchain is enterprise ready. “In that, while transactions are quick, the cost of getting it to work across the entire bank is outweighing the benefits,” Belgavi says.

The second trend is that banks are trying to reimagine the current enterprise softwares such as core banking, using blockchain at the centre. “It would be sometime before we see blockchain becoming the norm in the banking system,” Belgavi added.