In the first quarter of 2025, Pragati Bank Ltd., a mid-sized private sector bank in India, began to feel the pressure of rising competition from nimble fintech players. These new- age companies were offering real-time pa

In the first quarter of 2025, Pragati Bank Ltd., a mid-sized private sector bank in India, began to feel the pressure of rising competition from nimble fintech players. These new- age companies were offering real-time payments, decentralized investment products and seamless user experiences that traditional banks struggled to match. Pragati Bank, with its legacy systems and centralized databases, often found itself dealing with reconciliation delays, operational bottlenecks, and increasing customer complaints about transparency. It was against this backdrop that the Board of Directors initiated a discussion on adopting blockchain technology as part of the bank's long-term digital transformation agenda. The bank's management recognized that blockchain, though popularly associated with cryptocurrencies, offered much broader applications. The directors were also keen on the promise of reducing dependence on third-party auditors and intermediaries, which not only raised costs but also left scope for human errors. To justify the investment, the Board asked the executive team to present a clear business case. The team highlighted three areas of concern. First, the time and effort spent reconciling inter-branch and inter-bank transactions consumed enormous resources and affected service delivery. Second, customers were increasingly demanding quicker settlements and transparent systems where they could track their transactions instantly. Third, the bank was facing heightened risks from cyber threats, making it necessary to adopt a system that ensured confidentiality, integrity and availability of data. Blockchain, they argued, could provide a framework that addressed all these concerns, provided it was implemented correctly. The bank did not want to adopt the technology blindly. The technology committee studied global practices and found that leading banks in Europe and Singapore had already begun using blockchain for trade finance and settlements. Some institutions had also experimented with decentralized finance applications that enabled peer-to-peer lending without involving traditional intermediaries. Non-fungible tokens, although popularly known in the art world, were also being used to certify ownership of digital contracts and documents, a use case highly relevant to loan agreements and property papers. Encouraged by these developments, Pragati Bank began exploring potential vendors who could deliver blockchain solutions adapted to its needs. Three vendors were shortlisted and invited to present their products through a structured request for proposal process. There was also the larger issue of aligning the bank's management information system, which handled everything from customer databases to HR processes, with the distributed design of blockchain. Pragati Bank's prime service that is offered in the banking industry is to solve the financial problems that the customers of the bank are facing. The MIS in a bank must be designed in such a manner that it is able to provide differentiated services to the varied service requests of the customers. The key factors which Pragati Bank Ltd should consider while designing a Banking Information System may be Customer Database; Service to the Account Holders; Service for Business Promotions; Index Monitoring System; Human Resource Upgrade. The Company Secretary reminded the Board that under the Companies Act, the responsibility of maintaining statutory books of accounts remained unchanged, regardless of the medium or technology used. Blockchain, therefore, could complement but not replace legal and regulatory obligations. Despite these concerns, the bank approved a pilot project with one of the vendors. Blockchain was introduced in trade finance, where letters of credit and cross-border remittances were recorded on the distributed ledger, and in payroll management, where salary payments and vendor bills were validated through smart contracts. The early results were encouraging, transaction times reduced significantly, reconciliation errors dropped, and customers appreciated the enhanced transparency. However, new risks soon surfaced. A coding flaw in one smart contract led to an overpayment to a supplier, and because blockchain entires were irreversible, the error could not be corrected. Regulators also expressed apprehensions that peer-to-peer lending platforms modelled on decentralized finance could undermine established safeguards designed to protect depositors. The Chief Information Security Officer emphasized that any system must guarantee secure and reliable information access, while the Committee stressed the need for staff training in blockchain, smart contracts, and cryptographic protocols. The Company Secretary proposed a phased approach. Instead of rolling out blockchain across all functions, the bank should first consolidate its success in internal operations such as vendor management and cross-border payments, while keeping experimental projects like decentralized lending within a controlled sandbox environment. He recommended drawing up a comprehensive compliance framework mapping blockchain transactions to statutory obligations, negotiating robust vendor contracts with clear liability clauses, and conducting independent audits of smart contracts. The Board accepted this advice and also resolved to publish an annual Blockchain Governance Report to communicate its approach transparently to shareholders, regulators and customers. While immutability, decentralization, and efficiency offered by the technology were compelling, the risks of coding errors, legal uncertainties, and regulatory pushback could not be ignored. The case highlighted the fact that blockchain was not merely a technological shift but a tansformation with deep legal, ethical, and governance implications. For traditional banks, the challenge lies not in jumping on the blockchain bandwagon but in carefully aligning innovation with fiduciary duties, compliance requirements, and the trust that underpinned their relationship with customers. Based on the facts, answer the following questions: Pragati Bank, with its legacy systems and centralized databases, often found itself dealing with reconciliation delays, operational bottlenecks, and increasing customer complaints about transparency. Why do you think Board of Directors initiated a dicussion on adopting blockchain technology as part of the bank's long-term digital transformation agenda ?