India's securities regulator SEBI and the Reserve Bank of India launched the Demat 2.0 pilot on September 10, 2026, at the Global Fintech Fest in Mumbai. Within 72 hours of going live, three corporate issuers — REC Ltd., Larsen & Toubro, and IIFL Finance — raised a combined ₹1,025 crore ($122 mil...
"Demat 2.0 is best understood as new infrastructure for the corporate bond market. By issuing bonds as tokens on a distributed ledger and settling them against the wholesale digital rupee in a single simultaneous step, the regulators are eliminating the gap between the security and the cash leg." — Nishchay Nath, Founder & CEO, BondScanner
India's securities regulator SEBI and the Reserve Bank of India launched the Demat 2.0 pilot on September 10, 2026, at the Global Fintech Fest in Mumbai. Within 72 hours of going live, three corporate issuers — REC Ltd., Larsen & Toubro, and IIFL Finance — raised a combined ₹1,025 crore ($122 million) in tokenized corporate bonds settled atomically through the RBI's wholesale central bank digital currency (e₹-W).
The pilot targets India's $627 billion corporate bond market, which has long suffered from thin secondary-market liquidity and a persistent buy-and-hold culture among institutional investors. Demat 2.0 places corporate bonds as native digital tokens on a permissioned distributed ledger operated by depositories, with cash settlement routed through the RBI's Unified Markets Interface. The bonds retain their existing legal character — same ISIN, coupon, maturity, rating, covenants, and investor protections. What changes is the settlement layer: both the bond and the payment leg clear in one indivisible transaction, eliminating the counterparty exposure that arises between trade and settlement in conventional markets.
India is now the first G20 economy to integrate tokenized securities issuance with a live wholesale CBDC at scale under a joint regulatory sandbox. The initiative is structured as a three-phase rollout, starting with institutional issuance and moving toward secondary trading and eventual retail access.
Demat 2.0 operates within SEBI's Regulatory Sandbox Framework. The system has three layers:
Token layer. Corporate bonds are issued as native digital tokens on a private, permissioned distributed-ledger network operated by India's central securities depositories (NSDL and CDSL). Each token carries the bond's full legal identity — ISIN, coupon schedule, maturity date, credit rating, covenants, and investor protections. According to SEBI, these tokenized bonds carry "identical legal character and regulatory treatment as conventional demat bonds."
Settlement layer. The cash leg runs through the Reserve Bank of India's wholesale CBDC, known as the e₹-W (digital rupee — wholesale). The RBI's Unified Markets Interface connects the token ledger to the central bank's CBDC infrastructure. Settlement is atomic: the digital bond and the digital payment change hands simultaneously. Either both legs settle, or neither does.
Distribution layer. Primary issuance runs through the National Stock Exchange's Electronic Bidding Platform (EBP), the existing channel institutional investors already use for corporate bond auctions. No new trading venue was required for Phase 1.
The atomic delivery-versus-payment model eliminates a structural risk inherent in India's conventional bond market, where the securities leg and the funds leg can settle hours or days apart. In that gap, one counterparty has delivered but the other has not — creating exposure. Demat 2.0 closes that window to zero.
As Nishchay Nath of BondScanner noted: "Settlement becomes real-time, programmable and far less error-prone, with smart contracts capable of automating coupons and redemptions over time."
Between September 7 and September 9, 2026, three issuers completed tokenized bond sales under the Demat 2.0 framework:
| Issuer | Amount (₹ Cr) | Amount (USD) | Investors | Coupon | Tenor | |--------|---------------|-------------|-----------|--------|-------| | REC Ltd. | 500 | ~$59.5M | 18 | Not disclosed | Not disclosed | | Larsen & Toubro | 500 | ~$59.5M | 4 | 7.4% | 3 years | | IIFL Finance | 25 | ~$3M | 1 | 9.1% | 2 years | | Total | 1,025 | ~$122M | 23 | — | — |
REC Ltd., a state-owned power-sector lender, was the first to issue on September 7. Larsen & Toubro, one of India's largest engineering conglomerates, followed on September 9 with a similarly sized issuance at a 7.4% coupon. IIFL Finance, a non-bank lender, added a smaller ₹25 crore tranche at 9.1% the same day.
The speed of adoption — three issuers and 23 institutional investors in the first week — was faster than market participants expected. The National Stock Exchange facilitated all three issuances through its Electronic Bidding Platform, according to a report from Business Today on September 17, 2026.
The Demat 2.0 pilot addresses a structural deficiency in India's capital markets. India's total debt market stands at approximately ₹240 lakh crore ($2.8 trillion) as of March 2026, according to IndiaBonds. The corporate bond segment accounts for ₹53.64 lakh crore ($627 billion), or roughly 22.5% of the total.
The problem is not market size. The problem is liquidity. India's corporate bond secondary market has historically suffered from:
The Union Budget 2026 introduced market-making and Total Return Swap frameworks to improve corporate bond liquidity, according to Business Standard. Demat 2.0 attacks the same problem from the infrastructure side: if settlement is instant, atomic, and programmable, the friction cost of secondary trading drops substantially.
Ashish Singhal, co-founder of CoinSwitch, said the importance of Demat 2.0 "lies not merely in tokenising corporate bonds, but in creating a programmable and interoperable framework for issuance, ownership, settlement and asset servicing."
The Reserve Bank of India launched its wholesale CBDC (e₹-W) on November 1, 2022, initially limited to settlement of secondary-market transactions in government securities. The wholesale digital rupee is distinct from the retail e₹-R, which targets consumer payments.
In 2025, RBI Governor Sanjay Malhotra announced the Unified Markets Interface (UMI) at the Global Fintech Fest, describing it as infrastructure designed to enable tokenization and settlement of financial assets using the wholesale CBDC. The UMI connects market participants — banks, depositories, exchanges — to the CBDC settlement layer through a standardized interface.
The Demat 2.0 pilot represents the first large-scale use of the UMI beyond government securities. By routing corporate bond settlement through the wholesale digital rupee, the RBI has effectively created a bridge between tokenized capital markets and central bank money. This is a distinction that matters: settlement occurs in central bank liabilities, not commercial bank deposits or stablecoin equivalents.
Prateek Gupta, head of business at Mudrex, framed it as India applying its "Digital Public Infrastructure playbook — on which banks, exchanges and depositories operate — to other asset classes."
India's DPI approach — the combination of Aadhaar (identity), UPI (payments), and now UMI (capital markets) — provides a regulatory and technical template that differs from both the permissionless blockchain approach favored by DeFi protocols and the proprietary platform model used by most Western tokenization initiatives.
According to the Atlantic Council's CBDC Tracker, 146 countries and currency unions representing over 98% of global GDP are exploring CBDCs as of May 2026. Seventy-seven are in advanced development, pilot, or live stages. Fourteen G20 members are in pilot phase.
Three retail CBDCs are live: the Bahamas (Sand Dollar), Jamaica (JAM-DEX), and Nigeria (eNaira). None has achieved meaningful transaction volume relative to existing payment rails.
China's e-CNY remains the largest CBDC pilot globally, having processed more than 3.4 billion transactions worth approximately 16.7 trillion renminbi (~$2.3 trillion) by December 2025, according to data compiled by CBDCwiki.
Russia launched its digital ruble nationwide on September 1, 2026, requiring all 12 systemically important banks to support transactions and mandating acceptance by large retailers with annual revenue exceeding ₽120 million. According to the Moscow Times, public demand remains weak — only one in 10 Russians reported willingness to receive a full salary in digital rubles.
India's approach is distinct in two respects. First, the RBI has separated wholesale and retail CBDC tracks and is deploying the wholesale instrument as capital markets infrastructure rather than a consumer payment tool. Second, the Demat 2.0 pilot integrates the CBDC with an existing regulatory framework (SEBI's sandbox) rather than creating a parallel regulatory structure. This means tokenized bonds operate under the same investor protection regime as conventional securities.
No other G20 economy has reached the stage of settling over $100 million in tokenized corporate bonds through a wholesale CBDC under a live regulatory sandbox.
SEBI has outlined three phases for the Demat 2.0 expansion:
Phase 1 (Current): Institutional issuance of tokenized corporate bonds through the Electronic Bidding Platform, settled via e₹-W. This phase is live as of September 7, 2026.
Phase 2 (Timeline TBD): Introduction of secondary-market trading on existing request-for-quote platforms, with real-time digital rupee settlement. This phase is expected to extend access to a broader set of institutional participants.
Phase 3 (Timeline TBD): Retail investor access through demat accounts and compatible digital rupee wallets. SEBI has also indicated potential expansion to other financial instruments — treasury bills, certificates of deposit, derivatives — and inclusion of credit rating agencies and depository participants.
Neither Phase 2 nor Phase 3 has a published target date.
Several structural questions remain unresolved:
India's Demat 2.0 pilot is a controlled experiment in what happens when a central bank digital currency meets capital markets infrastructure. The $122 million raised in the first week provides evidence of institutional willingness to use the new rails. The atomic settlement mechanism eliminates a genuine structural risk. The regulatory design — sandbox-contained, legally equivalent to existing instruments, jointly supervised — reduces the compliance ambiguity that has slowed tokenization pilots in other jurisdictions.
The pilot's long-term significance depends on factors it cannot yet demonstrate: secondary-market trading volume, retail participation, and scalability beyond sandbox constraints. India's Digital Public Infrastructure track record — Aadhaar, UPI — suggests the institutional capacity to scale exists. Whether the corporate bond market's structural inertia can be overcome by better plumbing remains an open empirical question.
The data from Phase 1 is encouraging. It is also insufficient to draw conclusions about Phase 2 and beyond.