India launches tokenized corporate bond pilot with 10.25 billion rupees issued

India’s securities regulator and central bank have launched a tokenized corporate bond pilot under Demat 2.0, with three companies issuing a combined 10.25 billion rupees, about $107 million.

The pilot uses digital tokens for issuance and custody, linking to India’s wholesale CBDC settlement infrastructure.

Demat 2.0 connects tokenized bonds to RBI CBDC settlement

SEBI said Demat 2.0 enables corporate bonds to be issued and held as digital tokens on a distributed ledger operated by the country’s statutory depositories. The system connects to the Reserve Bank of India’s (RBI) wholesale central bank digital currency (CBDC) through its Unified Market Interface.

SEBI said atomic settlement reduces the timing gap between movement of money and bonds. It also said smart contracts can automate interest and redemption payments.

First issuances: REC, Larsen & Toubro, and IIFL

The initial issuance came from public-sector lender REC. It raised 5 billion rupees from 18 investors on Monday.

Engineering conglomerate Larsen & Toubro (L&T) raised another 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 supports same-day funding for issuers after bidding, instead of two to three days later.

Pilot expands beyond the initial REC plan

SEBI said the program expanded beyond an earlier Reuters report that described testing tokenized corporate bonds through an REC issuance of less than 5 billion rupees with selected investors.

The launch added two additional issuers, bringing total issuance to more than double the originally expected REC amount. SEBI said first-phase issuances are ongoing.

Later phases: secondary trading and retail access

SEBI said later phases of Demat 2.0 will introduce secondary trading through existing request-for-quote platforms and open tokenized bonds to retail investors. The regulator said experience from the pilot would guide any wider rollout.

Investors can hold the tokenized bonds in existing Demat accounts without opening a separate account or completing new Know-Your-Customer checks. Participants must enable Demat 2.0 through their depository and maintain a wholesale CBDC wallet with a participating bank to settle payments.

Why it matters

The pilot is designed to integrate tokenized bond issuance and custody with regulated market infrastructure and wholesale CBDC settlement, while keeping the legal status of bonds and investor protections unchanged.