India launches tokenized bond pilot

India’s securities regulator and central bank have launched a tokenized corporate bond pilot, with three companies issuing a combined 10.25 billion rupees (about $107 million) through the new market infrastructure. 

On Thursday, the Securities and Exchange Board of India (SEBI) said Demat 2.0 allows corporate bonds to be issued and held as digital tokens on a distributed ledger owned 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. 

The first issuance came from public-sector lender REC, which 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, while 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 instead of two to three days later. The regulator said atomic settlement removes the delay between the movement of money and bonds, while smart contracts can automate interest and redemption payments. 

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 the initial reported plan to include two additional issuers, bringing the total to more than double the amount originally expected from REC. 

Issuances under the first phase remain ongoing. SEBI said later phases would introduce secondary trading through existing request-for-quote platforms and provide access to retail investors, with experience from the pilot guiding any wider rollout. 

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

SEBI said India is the first country to combine bonds issued natively on a distributed ledger, ownership records maintained by statutory depositories and settlement in CBDCs within existing regulated market infrastructure. The regulator said tokenization does not change the legal status of the bonds, repayment obligations or investor protections. 

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