India Begins Tokenizing Its $620 Billion Corporate Bond Market

India's securities regulator SEBI and the Reserve Bank of India have launched 'Demat 2.0,' a pilot to issue and settle corporate bonds as native digital tokens on a permissioned ledger run by depositories NSDL and CDSL. Three issuers have already raised a combined 1,025 crore rupees (about $107 million), and the system links tokenized bonds to the RBI's wholesale digital rupee for atomic settlement.

By AI NewsroomPublished about 6 hours agoUpdated about 6 hours ago0 views

India Begins Tokenizing Its $620 Billion Corporate Bond Market

Why It Matters

The pilot represents an early, state-led move to apply distributed-ledger technology to a roughly $620 billion corporate bond market while using the central bank's digital currency to speed settlement and automate payments. If scaled, it could shorten funding timelines and change post-issuance processing without altering legal investor protections.

Key Facts

Program name: Demat 2.0
Regulators: SEBI and RBI
Ledger operators: NSDL and CDSL
Target market size: $620 billion
Issuers in pilot: REC, Larsen & Toubro, IIFL Finance

India has started a pilot to tokenize corporate bonds, issuing them as native digital tokens on a private, permissioned ledger operated by the country's two statutory depositories, NSDL and CDSL. The initiative, announced by the Securities and Exchange Board of India alongside the Reserve Bank of India under the name 'Demat 2.0,' is aimed at applying distributed-ledger technology to the nation's large corporate bond market.

Three issuers have already used the framework, raising a total of 1,025 crore rupees (about $107 million). State-owned REC led the pilot on Sept. 7, raising 500 crore rupees from 18 investors and calling it India's first tokenized corporate bond; Larsen & Toubro followed with 500 crore rupees, and non-bank lender IIFL Finance issued 25 crore rupees.

The token ledger is connected to the RBI's wholesale digital rupee via a Unified Market Interface, enabling atomic settlement so the bond token and payment transfer occur simultaneously. The setup also supports smart contracts that can automate interest payments and redemptions, shortening the time between issuance and receipt of proceeds compared with conventional settlement cycles.

Regulators emphasized that tokenization will not change the bonds' legal framework: ratings, debenture trustees, listing rules and investor protections remain intact, and the market structure will not be fragmented. Investors can keep tokenized bonds in existing Demat accounts without undergoing new know-your-customer checks. SEBI and the RBI plan subsequent phases to introduce secondary trading and, eventually, retail access. The pilot forms part of a broader Indian approach of cautiously distancing private cryptocurrencies while advancing state-backed blockchain initiatives such as the digital rupee.