India’s securities regulator has launched the Demat 2.0 pilot with three issuers raising a combined ₹1,025 crore, or about $107 million, through tokenized corporate bonds. The initiative connects distributed ledger technology with the Reserve Bank of India’s wholesale central bank digital currency, testing whether securities issuance and settlement can be made faster and less prone to operational delays.
KEY TAKEAWAYS
- REC, L&T and IIFL have issued a combined ₹1,025 crore in tokenized corporate bonds.
- Demat 2.0 connects the bond ledger with the RBI’s wholesale digital rupee for atomic settlement.
- The tokenized bonds retain the same legal status, investor rights and issuer obligations as conventional bonds.
- The first phase focuses on institutional issuance, while secondary trading and retail participation are planned for later stages.
INDIA PUTS TOKENIZED BONDS INTO LIVE MARKET TESTING
The Securities and Exchange Board of India (SEBI) said three companies have already used Demat 2.0 to issue corporate bonds on a distributed ledger operated by the country’s statutory depositories. The first transaction came from state owned REC Ltd. on September 7, when it raised ₹500 crore from 18 investors.
Larsen & Toubro followed on September 9 with another ₹500 crore raised from four investors. IIFL then issued ₹25 crore to a single investor on the same day, bringing the pilot’s total issuance to ₹1,025 crore.
The pilot represents a change in the infrastructure used to record and settle the bonds rather than the creation of a new type of security. SEBI said the tokenized instruments retain their existing ISINs, repayment obligations, coupons, maturities, covenants, ratings and investor rights. Existing requirements covering credit ratings, debenture trustees, listings and disclosures also continue to apply.
BOND AND PAYMENT SETTLE TOGETHER
A key feature of Demat 2.0 is its connection to the RBI’s wholesale digital rupee, known as the e₹, through the central bank’s Unified Market Interface. This allows the tokenized bond and payment to settle together in what is known as atomic settlement. Under the existing process, securities and funds move through separate stages, creating settlement delays. SEBI said the new infrastructure can allow issuers to receive funds on the same day as bidding instead of waiting the typical two to three days.
The system could also automate parts of bond servicing. Smart contracts can be used to trigger interest and redemption payments, while authorized institutions can access bondholder information from the shared ledger.
SEBI said:
“Taken together, these features are expected to make the issue, settlement, and servicing of corporate bonds faster, more efficient, and less error-prone.”
The potential benefits extend beyond issuers. Faster settlement could allow investors to receive proceeds more quickly when securities are sold in the secondary market, although that functionality has not yet been introduced in the first phase.
THE PILOT IS ONLY THE FIRST PHASE
Demat 2.0 is being introduced in stages. The initial phase is focused on institutional issuance, giving regulators an opportunity to assess the technology within existing securities infrastructure. Later phases are expected to introduce buying and selling through existing request for quote platforms and eventually allow retail investors to participate.
For investors participating in the pilot, the tokenized bonds remain connected to the existing demat system. SEBI said participants do not need a separate securities account or fresh KYC, although they must enable Demat 2.0 with their depository and maintain a wholesale CBDC wallet with a participating bank for settlement.
India’s approach also differs from many international tokenization experiments because the bonds are issued natively on a distributed ledger while ownership remains within regulated depository infrastructure and settlement uses central bank money.
CONCLUSION
The ₹1,025 crore raised through Demat 2.0 gives India an early live test of tokenized securities rather than a purely theoretical blockchain experiment. The first transactions show how distributed ledgers and central bank digital currency can be connected within an existing regulated bond market.
The more consequential tests will come with secondary trading and wider investor access. Those phases will determine whether faster settlement and automated servicing can translate into broader market use while preserving the legal protections already attached to conventional corporate bonds.
