Primechain Technologies, a Mumbai-based startup that operates India’s BankChain consortium, has launched a blockchain system for the trading of so-called “stressed” assets.
The project, built on a blockchain called Primechain-ASSET, will see the creation of an exchange for selling and buying stressed assets, said Sudin Baraokar, innovation adviser at State Bank of India, a member of BankChain.
Stressed assets include non-performing assets (NPAs), restructured loans, assets under reconstruction and written-off assets.
Allowing banks to divide up stressed assets and sell them to other banks, asset reconstruction companies or funds, the blockchain platform comprises a smart contract-powered auction system, built-in regulatory reporting and other features. The blockchain will also offer a repository for documents related to the assets, according to the release.
Baraokar continued:
“This [project] will help banks get a more data and market-driven price discovery of stressed assets and will automate and bring a more orchestrated effort for sale of Non-Performing Assets (NPAs). By leveraging blockchain, we can then continue to develop more structured products once we have a Loan Asset Exchange system in place.”
NPAs have come into limelight recently, as an observed decline in asset quality has been touted as an economic risk for banks.
“Stressed assets have become a multi-trillion dollar challenge for the global banking sector. The gross non-performing assets of the banks in India are over Rs. 8 lakh crore [$123 billion],” Shinam Arora, CEO of Primechain, said in the statement.
Also addressing the issue, the Reserve Bank of India last month issued a reassessed framework for banks, allowing early detection and identification of stressed assets.
Graph image via Coindesk archives