In a first step towards digitising trade payments, ArcelorMittal Nippon Steel India (AM/NS India) recently executed the country’s first domestic paperless bill discounting transaction in partnership with ICICI Bank.
The end-to-end electronic transaction comprising digital issuance of Letter of Credit (LC), advisory and presentment of documents took place between AM/NS India, its Baroda-based customer Vijay Tanks, and ICICI Bank.
The transaction recently went live on ICICI Bank’s ‘TradeChain’, the state-of-the-art digital platform for domestic trade. ICICI Bank was the intermediary between the buyer and seller.
ICICI Bank’s branch in Baroda, Gujarat, issued an LC for the buyer, Vijay Tanks; while the Bank’s branch at Hazira, Gujarat, advised and negotiated for the seller, AM/NS India.
The terms of the LC required AM/NS India to digitally present the documents to ICICI Bank evidencing the transaction flow.
“The transaction validates the commercial and operational viability of online discounting as an alternative to traditional paper-based transactions. It is a positive step towards enabling the digitisation of trade payments and provides for better working capital efficiency for the company and trade partners,” Amit Harlalka, Deputy Chief Financial Officer, AM/NS India, said.
He added: “This transaction is seen by many in banking and business as a prelude to blockchain, a technology even more robust in security, identity and transparency, and which is now being widely studied for possible adoption by Indian banks.”
This solution has the potential to enable greater velocity of trade at lower cost for customers. In paper-based trades, physical goods at times arrive before their supporting documents, leading to corporates incurring demurrage charges. This will be a thing of the past with such digital developments, an AM/NS India release said.
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