There’s some interesting development on blockchain, coming in from India. In what would mark yet another step by a major financial institution towards commercializing blockchain, YES BANK, an Indian origin private sector bank has announced its plans to issue Commercial Paper (CP) worth around INR 100 Crores (~$12.5Mn) using Blockchain technology for Vedanta Limited. This appears to be the first issuance of CP with the help of Blockchain technology in Asia.
The amount was raised on R3’s blockchain network by Vedanta Limited, a natural resources conglomerate. The platform was built by US-based fintech MonetaGo.
Let’s dive into CP. What is CP?
Commercial Paper, short-termed CP is an unsecured money market instrument having high value regarding a promissory note. For instance, you go to a market and due to insufficient funds or any such reason, the retailer gives you a piece of paper which notes ‘ We are to give Mr.You Rs X’. He issues and stamps it. This would be a much simpler description of a CP. The minimum credit rating for a company trying to seek a CP should be A-2, as per India’s stock market regulator SEBI.
The blockchain technology helps reduce time to automate processes involved in the debt market to an hour, which usually require a couple of days.
Blockchain was used to cover only one leg of the transaction between the bank and the firm in its first issuance. YES Bank now intends to bring in other participants in about 3-4 months.
“Apart from reducing operational risk and costs, this technology solution lays the foundation for a more transparent and efficient process to cater to India’s growing CP market,” said Asit Oberoi, Senior Group President and Global Head Transaction Banking Group and Chief Experience Officer, YES Bank.
GR Arun Kumar, Group CFO, Vedanta Group, said, “Vedanta will benefit from the digitised and simplified workflow which shortens the laborious process running into hours to just a few minutes and complete transparency that this platform offers to all stakeholders.”