Transforming Government banking by leveraging the potential of blockchain technology

Finance is the backbone of any Organization. Government is no different. The financial health of the Government is critically dependent on the efficiency with which its banking needs are managed. The Central Bank is generally the banker to the Governments. In India, Reserve Bank of India and Government have been in the forefront of implementing various reforms to strengthen and streamline the processes involved in tax collections and transfer payments. Despite these reforms, some issues still persist and are having detrimental effect on overall efficiency of Government banking. One important factor for existence of these issues is the fact that every government transaction has to pass through a long chain of stakeholders before it is accounted with finality. Blockchain technology is an emerging technology that promises to facilitate speedy and efficient collaboration among all the stakeholders and also facilitates disintermediation to the extent possible. Further, during the crisis like situations (floods, earthquakes or COVID 19 like pandemics), immediate relief is of utmost importance and government aid should reach the vulnerable/affected citizens at a very high speed. However, it is during these stress times that physical access to banking channel gets restricted. Blockchain can facilitate decentralization of last mile delivery channel, by enabling peer-to-peer and cashless transactions even among the unbanked population. This paper identifies the current issues in Government banking ecosystem, analyses the root causes behind such issues, introduces Blockchain based distributed ledger technology, examines the extent to which this emerging technology can address such issues and describes the way forward.