GAIL was the first corporate to have gone live on the feature.
Almost all the large Indian banks, including State Bank of India, will soon provide e-bank guarantees to customers in collaboration with the SWIFT platform, Kiran Shetty, CEO and regional head, SWIFT, India & South Asia, told FE.
Earlier this month, Axis Bank became the first private sector lender to announce implementation of a e-Bank Guarantee (e-BG) solution, in collaboration with SWIFT. GAIL was the first corporate to have gone live on the feature.
“We are in the process of activating various corporates in this journey…Probably in the next three months, you will see many banks starting to use this service… SBI is also on the road map for this journey and almost all the major banks will be a part of it…,” Shetty said.
E-bank guarantees will help accelerate economic outcome in the arena of trade, as it lowers the transaction time for both banks and corporates and at the same time helps prevent frauds, since a digital trail gets established for each transaction, Shetty said.
“… what happened in the past with bank guarantees (Harshad Mehta scam) was due to manual interventions and absence of digital record of documents. People (were) colluding between makers and checkers and making those fraudulent bank guarantees…,” Shetty said.
This is where e-bank guarantees become fraud-proof as all the messages passed on the SWIFT platform are encrypted and a password key is available only between two parties – banks and corporates, he said.
Including Axis Bank, 29 banks across the globe have till date gone live on SWIFT’s e-bank guarantee feature.
SWIFT is also looking to play an important role in cross-border acceptance of central bank digital currencies, or CBDCs, Shetty said. “With so much interest towards digital currencies from central banks around the world, we believe the financial industry should prepare for a day when using digital currencies, alongside existing systems, for cross-border payments could be a routine,” Shetty said. SWIFT has designed experimental solutions for banks to easily integrate their domestic CBDC flows into the cross-border payments system.
SWIFT’s experiments have showed that interlinking of CBDCs is possible through a single gateway that keeps ensuring the security, compliance, authentication and tracking of the SWIFT network, while its new transaction management capabilities could handle all inter-network communication.
“…Following the success of the sandbox testing, we will now develop a beta version of our interlinking solution that we will use for further testing by central banks. We will also run a second phase of the CBDC sandbox, focusing on new use cases and implementing additional functionalities of CBDCs,” Shetty said.
This is where e-bank guarantees become fraud-proof as all the messages passed on the SWIFT platform are encrypted and a password key is available only between two parties – banks and corporates, he said.
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