India launches tokenized corporate bond pilot with 10.25 billion rupees issued
Key Takeaways
- •Three issuers—REC, Larsen & Toubro, and IIFL—raised a combined 10.25 billion rupees, roughly $107 million, in tokenized corporate bonds during the pilot's first phase.
- •The Demat 2.0 system records corporate bonds as tokens on distributed ledgers operated by India's statutory depositories and settles payments through the RBI's wholesale CBDC via its Unified Market Interface.
- •The infrastructure lets issuers receive funds on the day of bidding instead of waiting two to three days, using atomic settlement and smart contracts to automate interest and redemption payments.
- •The launch surpassed the August plan for a single REC issuance of under 5 billion rupees by adding two more issuers, bringing the total to more than twice the originally expected amount.
- •Subsequent phases will introduce secondary trading through request-for-quote platforms and retail access, while investors can hold tokens in existing Demat accounts without new Know-Your-Customer checks.
India’s securities regulator and central bank have launched a pilot for tokenized corporate bonds, with three companies issuing a combined 10.25 billion rupees, or about $107 million, through the new market infrastructure.
The Securities and Exchange Board of India (SEBI) announced on Thursday that Demat 2.0 enables corporate bonds to be issued and held as digital tokens on a distributed ledger owned by the country’s statutory depositories. The system connects with the Reserve Bank of India’s (RBI) wholesale central bank digital currency (CBDC) through its Unified Market Interface.
According to SEBI’s announcement, the first issuance came from public-sector lender REC, which raised 5 billion rupees from 18 investors on Monday. Engineering conglomerate Larsen \u0026 Toubro (L\u0026T) raised a further 5 billion rupees from four investors on Wednesday. Non-bank lender IIFL issued 250 million rupees in bonds to one investor on the same day.
SEBI said the infrastructure allows issuers to receive funds on the day of bidding, rather than waiting two to three days. The regulator said atomic settlement removes the delay between the transfer of money and bonds, while smart contracts can automate interest and redemption payments. These features mean the pilot is testing changes to issuance, settlement and payment processing while keeping the bonds within existing regulated market infrastructure.
Pilot expands beyond initial REC plan
In August, Reuters reported that India planned to test tokenized corporate bonds through an REC issuance of less than 5 billion rupees involving selected investors. The launch expanded beyond that initial plan by adding two more issuers, taking the total amount to more than twice the amount originally expected from REC.
Issuances under the first phase are still ongoing. SEBI said subsequent phases would introduce secondary trading through existing request-for-quote platforms and extend access to retail investors. Experience from the pilot will guide any broader rollout, making the development of secondary-market functionality and the eventual scope of investor access key areas to watch.
Investors can hold the tokenized bonds in their existing Demat accounts without opening a separate account or completing new Know-Your-Customer checks. Participants must, however, enable Demat 2.0 through their depository and maintain a wholesale CBDC wallet with a participating bank to settle payments.
SEBI said India is the first country to combine bonds issued natively on a distributed ledger, ownership records maintained by statutory depositories and CBDC settlement within existing regulated market infrastructure. The regulator added that tokenization does not alter the bonds’ legal status, repayment obligations or investor protections.
