India has begun a pilot program that issues and settles corporate bonds as blockchain-based tokens, bringing distributed-ledger infrastructure into one of the country’s largest capital markets. The initiative, called “Demat 2.0,” was presented last week by the Securities and Exchange Board of India and the Reserve Bank of India at the Global Fintech Fest.
The pilot applies tokenization to India’s roughly $620 billion corporate bond market while using the RBI’s wholesale digital rupee for settlement. Officials said the framework is designed to change how the instruments are issued and transferred without changing their legal character or investor protections.
How the pilot is structured
Under the model, a corporate bond is created as a native digital token on a private, permissioned ledger. The system is operated by India’s statutory depositories, NSDL and CDSL, rather than on an open public blockchain.
SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra introduced the program jointly. The setup connects the token ledger to the RBI’s wholesale central bank digital currency through a Unified Market Interface.
First issuances already completed
Three issuers have already used the framework, raising a combined 1,025 crore rupees, or about $107 million. State-owned lender REC was first on Sept. 7, raising 500 crore rupees from 18 investors in what the company described as India’s first tokenized corporate bond.
Larsen & Toubro then raised another 500 crore rupees through the system, followed by non-bank lender IIFL Finance with a 25 crore rupee issuance. These early transactions make the pilot more than a policy announcement, with live deals already executed through the new rails.
Why regulators say it matters
The link to the wholesale digital rupee is intended to enable atomic settlement, meaning the bond transfer and payment happen at the same time. In practice, that can allow issuers to receive proceeds on the bidding day instead of waiting several days for settlement to be completed.
SEBI also said smart contracts can be used to automate recurring processes such as coupon payments and redemptions. The pitch from regulators is that tokenization can speed up post-trade operations while keeping the familiar structure of the underlying bond market intact.
What stays the same and what comes next
According to SEBI, the bonds themselves are not legally altered by being issued as tokens. They keep the same credit ratings, debenture trustees, listing requirements and investor safeguards that apply in the conventional market.
The regulator also said the market will not be split into separate pools of liquidity. Investors can hold tokenized bonds in their existing Demat accounts without going through new know-your-customer checks.
Later phases of Demat 2.0 are planned to add secondary-market trading and, after that, retail participation. For now, the confirmed next step is the expansion of the pilot beyond initial primary issuances as regulators test how tokenized bonds function within India’s existing market framework.
Source: decrypt.co