India has moved tokenized bonds from concept to live financial infrastructure, completing Rs. 1,025 crore of issuance through three companies in September 2026. The pilot could reshape settlement, although its impact on liquidity remains unproven.
Three Issuers Test Tokenized Bonds
Between September 7 and 9, REC, L&T and IIFL Finance participated in India’s first tokenized bond pilot. REC raised Rs. 500 crore through a one-year-nine-month bond carrying a 7.30% coupon. The issue originally had a Rs. 100 crore base size but attracted approximately Rs. 796 crore in bids. L&T subsequently issued Rs. 500 crore through a three-year instrument carrying a 7.40% coupon, while IIFL Finance raised Rs. 25 crore.
RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey formally unveiled the initiative on September 10 at the Global Fintech Fest.
Settlement Gets a Digital Upgrade
Tokenization does not change investors’ underlying securities. The bonds retain their ISINs, ratings, trustee supervision and existing legal rights.
Instead, the experiment changes settlement infrastructure. Transactions use the RBI’s wholesale Central Bank Digital Currency (CBDC), enabling same-day atomic delivery-versus-payment rather than conventional settlement cycles such as T+1.
Investors also retain existing demat accounts and KYC arrangements, with depositories managing the cryptographic keys.
Highlighting the importance of maintaining confidence alongside technological development, Malhotra said, “A financial system which moves at the speed of light but does not command trust will not see many takers.”
Liquidity Remains Untested
The Rs. 1,025 crore pilot represents only a fraction of India’s roughly Rs. 59 lakh crore debt market. Tokenization may shorten settlement, but it has not yet demonstrated that investors will trade corporate bonds more frequently.
The instruments currently carry a three-month lock-in, while secondary-market trading is targeted for December 2026. According to the pilot framework, retail participation is expected only during Stage II.
REC’s pricing also remained broadly comparable with conventional bonds, providing no clear evidence yet of a tokenization-related yield advantage.
The Next Test
India has demonstrated that regulated bonds can be issued and settled using tokenized infrastructure. The bigger test begins with secondary trading.
Whether faster settlement produces deeper liquidity, lower operational friction and broader participation will determine the technology’s long-term importance. For India’s debt market, successful issuance is only the first measurable milestone.
Also Read: India Expands Tokenization Push as Maharashtra Eyes Public Asset Funding
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