India is testing a new model for capital-market infrastructure through Demat 2.0, combining tokenized corporate bonds with settlement using the Reserve Bank of India’s (RBI) wholesale digital rupee.
SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra announced the initiative at Mumbai’s Global Fintech Fest on September 10. The pilot has already processed three corporate bond issuances worth Rs. 1,025 crore, or approximately USD 116 million.
Tokenized Bond Issuances Begin
State-owned REC became the first issuer under the framework on September 7, raising Rs. 500 crore through tokenized corporate bonds.
Larsen & Toubro followed on September 9 with another Rs. 500 crore, becoming the first private-sector company to issue through the infrastructure. IIFL subsequently issued Rs. 25 crore.
REC’s issuance also demonstrated potential efficiency gains. The Rs. 500 crore offering attracted Rs. 796 crore in bids, while pay-in, allotment and listing were completed on the same day.
How Does Demat 2.0 Work?
Demat 2.0 does not create a new security. Instead, corporate bonds are represented on a permissioned distributed ledger operated through India’s regulated depository infrastructure.
The payment side connects with RBI’s wholesale central bank digital currency through the Unified Market Interface.
According to SEBI, this enables ‘atomic delivery-versus-payment,’ where securities and digital rupees transfer simultaneously. Either both components settle successfully or neither does, potentially reducing settlement and reconciliation risks.
Smart contracts could eventually automate processes including interest and redemption payments, allowing digital rupees to reach investors’ CBDC wallets on scheduled dates.
Existing Investor Protections Remain
Tokenization does not change bondholders’ underlying legal rights. Existing requirements covering disclosures, credit ratings, debenture trustees, listings and issuer obligations continue to apply.
Investors will also not require entirely separate conventional securities accounts. According to SEBI, the existing demat and depository framework remains operational while distributed-ledger technology works underneath it.
What Comes Next?
The initial pilot is limited to institutional participants, but SEBI plans to test secondary-market transfers next. Retail access could follow later, while the architecture may eventually expand beyond corporate bonds.
Demat 2.0 is therefore fundamentally different from crypto-native tokenization. Rather than permissionless blockchains or private stablecoins, India is combining regulated securities with RBI-issued digital money.
If expanded successfully, the system could demonstrate how tokenization and central bank digital currency can modernize traditional capital markets without replacing existing regulatory protections.
Also Read: India Orders Takedown of 15 Offshore Crypto Platforms Over PMLA Non-Compliance
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