India has started testing tokenized corporate bonds through a new market infrastructure that connects blockchain-based securities with the Reserve Bank of India’s wholesale digital rupee.
The Securities and Exchange Board of India, or SEBI, launched the “Demat 2.0” pilot with the RBI to test faster bond issuance and settlement in India’s corporate bond market, valued at about USD 620 billion.
The pilot has already processed bond issues from REC, Larsen & Toubro and IIFL Finance. Together, the three companies have raised Rs. 1,025 crore through the new system.
SEBI and RBI Launch Demat 2.0 for Tokenized Corporate Bonds
Under Demat 2.0, companies can issue corporate bonds as digital tokens on a permissioned distributed ledger. India’s regulated depositories, National Securities Depository Limited and Central Depository Services Limited, operate the infrastructure. Therefore, the system remains within the existing regulated securities framework.
SEBI introduced the pilot alongside the RBI at the Global Fintech Fest. The regulator said the structure combines digitally issued bonds, statutory depository records and central bank digital currency settlement. Investors can also hold eligible tokenized bonds through their existing Demat accounts rather than opening a separate investment account.
The bonds continue to carry their existing legal terms. These include coupon rates, maturity dates, credit ratings, debenture trustees and investor protections. As a result, tokenization changes how the securities are issued and settled without changing the basic rights attached to each bond.
REC, L&T and IIFL Raise Rs. 1,025 Crore Through Tokenized Bonds
REC became the first issuer under the pilot on September 7. The state-owned lender raised Rs. 500 crore from 18 investors through what it described as India’s first tokenized corporate bond issue.
Larsen & Toubro later raised another Rs. 500 crore through the system. IIFL Finance followed with a Rs. 25 crore issue. Combined, the three transactions reached Rs. 1,025 crore.
The tokenized bond ledger connects with the RBI’s wholesale digital rupee through the Unified Market Interface. This setup allows the bond and payment to move at the same time through atomic delivery-versus-payment settlement.
In traditional settlement systems, securities and payments can move through separate channels. Under the new model, both parts of the transaction settle together. This can reduce settlement risk and allow issuers to receive funds faster after a bond issue.
Digital Rupee Settlement Supports Automated Bond Payments
Demat 2.0 also allows smart contracts to handle certain corporate actions. These can include scheduled interest payments and bond redemptions. Consequently, the system can automate parts of the bond lifecycle while keeping the securities within India’s regulated financial network.
Participants need access to the required Demat 2.0 services through their depository. Settlement participants also need a wholesale central bank digital currency wallet with a participating bank.
SEBI plans to expand the pilot in stages. Later phases are expected to test secondary-market trading through existing request-for-quote platforms. Retail investor access is also planned for a future stage.
India has taken a cautious approach toward private cryptocurrencies while continuing to develop regulated blockchain-based financial infrastructure. The RBI has already introduced its digital rupee for wholesale and retail use cases.
The Demat 2.0 pilot now brings that digital currency infrastructure into the corporate bond market. For now, the program remains focused on controlled issuance and settlement before regulators expand trading and investor access.
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