India is set to launch tokenised corporate bonds next week using blockchain technology, according to bankers familiar with the matter.

State-run REC Ltd, a power sector financier under the Ministry of Power, aims to raise five billion rupees (about $60 million) through these innovative debt instruments. The offering will mark India's first debt issue featuring instant settlement capabilities on a blockchain.

The bond transactions will be facilitated by the Reserve Bank of India's (RBI) digital currency, the Digital Rupee, which is India's central bank digital currency (CBDC). The RBI has been piloting the Digital Rupee since late 2022, and using it to settle a corporate bond transaction would extend the pilot's use beyond retail and interbank payments. Participation in the upcoming sale will be limited to investors holding active digital wallets.

Tokenisation of bonds involves representing the securities as digital tokens on a blockchain, allowing for faster settlement and greater transparency compared with traditional bond market infrastructure, where settlement typically takes one or more days. Regulators and financial institutions in several markets, including the European Union and Hong Kong, have been testing or deploying similar blockchain-based bond issuance platforms, making India's move part of a broader global shift toward tokenised securities.

REC, formerly known as Rural Electrification Corporation, is a public sector non-banking financial company that finances power infrastructure projects across India. It regularly raises funds through domestic and overseas bond markets, and its latest offering could serve as a template for other state-owned and private issuers if the blockchain-based sale proceeds smoothly. Further details on the sale, including final terms and investor participation, are expected once the offering is formally launched next week.

Source: Economic Times