India's Securities and Exchange Board (SEBI) and the Reserve Bank of India (RBI) on September 10 launched the country's first tokenized corporate bond pilot, branded Demat 2.0, at the Global Fintech Fest in Mumbai. Three issuers — state-owned power financier REC Ltd., engineering conglomerate L&T...
"A financial system which moves at the speed of light but does not command trust will not see many takers." — Sanjay Malhotra, Governor, Reserve Bank of India
India's Securities and Exchange Board (SEBI) and the Reserve Bank of India (RBI) on September 10 launched the country's first tokenized corporate bond pilot, branded Demat 2.0, at the Global Fintech Fest in Mumbai. Three issuers — state-owned power financier REC Ltd., engineering conglomerate L&T Ltd., and financial services firm IIFL — raised a combined ₹1,025 crore ($107.2 million) in bonds issued natively on a distributed ledger and settled via the RBI's wholesale central bank digital currency (e₹-W).
The pilot targets India's ₹53.6 trillion ($627 billion) corporate bond market, currently settled on a T+1 basis through conventional depository infrastructure. Demat 2.0 replaces sequential settlement with atomic delivery-versus-payment: the bond token and the CBDC payment move simultaneously, eliminating counterparty risk on the settlement leg. Secondary market trading infrastructure is expected by December 2026, with retail access planned for a subsequent phase.
India is the first jurisdiction in which corporate bonds have been issued as native digital tokens on a ledger owned by statutory depositories (NSDL and CDSL), with the funds leg settled in a central bank digital currency within existing regulated market infrastructure — distinguishing the effort from sandbox-only experiments in Singapore, Hong Kong, and Switzerland.
The Demat 2.0 pilot operated under SEBI's Regulatory Sandbox Framework. Three issuers participated in Phase 1, which is limited to primary issuance to institutional investors:
| Issuer | Date | Amount (₹ Cr) | Amount (USD) | Investors | Coupon | Maturity | |--------|------|---------------|-------------|-----------|--------|----------| | REC Ltd. | Sept 7, 2026 | 500 | $52.3M | 18 | 7.3% | Sept 9, 2029 | | L&T Ltd. | Sept 9, 2026 | 500 | $52.3M | 4 | Not disclosed | Not disclosed | | IIFL | Sept 9, 2026 | 25 | $2.6M | 1 | Not disclosed | Not disclosed | | Total | | 1,025 | $107.2M | 23 | | |
REC Ltd.'s issuance, the first to complete, comprised 50,000 unsecured, listed, rated, and redeemable non-convertible debentures (NCDs) with a face value of ₹1 lakh each. Bid interest was strong: REC received ₹7.96 billion ($83.2 million) in bids against a base issue of ₹5 billion, a 1.59x subscription ratio.
According to SEBI Executive Director Maninder Cheema, corporate bonds were selected as the pilot asset class because they involve institutional participants, exhibit relative price stability, and carry less intensive trading volumes than equities — reducing systemic risk during testing.
The infrastructure consists of three core components:
1. Distributed Ledger (Depository-Owned) Corporate bonds are issued, held, and settled as native digital tokens on a distributed ledger owned and operated by India's two statutory depositories, NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). This preserves regulatory oversight: the depositories remain the legal record-keepers, as under existing securities law. The ledger replaces the backend database but does not alter the legal ownership chain.
2. Wholesale CBDC (e₹-W) The cash leg of each transaction settles in the RBI's wholesale digital rupee (e₹-W). Participants require a wholesale e₹-W wallet issued by a participating bank, separate from the retail digital rupee wallets already in circulation. The wholesale CBDC is central-bank money — it carries no commercial bank credit risk.
3. Unified Market Interface (UMI) The RBI's Unified Market Interface connects the depository DLT to the wholesale CBDC system, enabling atomic delivery-versus-payment (DvP). When a bond trade executes, the token transfer on the depository ledger and the CBDC payment through UMI settle simultaneously. If either leg fails, neither settles — eliminating settlement risk.
To participate, an investor needs two digital accounts: an e₹-W wholesale wallet (from a participating bank) and a new "Demat 2.0" securities wallet developed by NSDL/CDSL specifically to record holdings on the DLT chain. Existing credit ratings, debenture trustee requirements, listing obligations, and disclosure norms remain unchanged.
India moved its equity market to T+1 settlement in January 2023. Corporate bonds traded on exchanges also follow T+1, though OTC transactions sometimes settle on T+2. The Demat 2.0 pilot achieves T+0 — same-day, near-instant settlement.
The economic impact is measurable:
India's pilot enters a crowded field of sovereign and quasi-sovereign tokenized bond experiments. The key differentiator is the integration of statutory depository infrastructure with wholesale CBDC settlement:
Singapore: The Monetary Authority of Singapore (MAS) ran a 2026 pilot for tokenized government bills settled with wholesale CBDC, building on a 2025 interbank lending trial. Since 2022, MAS has partnered with 24 financial institutions on tokenization within its regulatory sandbox. Singapore's infrastructure is the most advanced for sovereign debt but has not yet scaled to corporate bonds at India's volume.
Hong Kong: The HKMA's 2026-27 budget confirmed construction of a dedicated tokenized bond platform (CMU OmniClear). Hong Kong issued HK$6 billion in multi-currency digital green bonds. The jurisdiction benefits from access to mainland Chinese capital through e-CNY settlement, but the corporate bond component remains in development.
Switzerland: SIX Digital Exchange (SDX) has facilitated tokenized bond issuances from the Swiss National Bank and commercial entities, using its own DLT infrastructure. Settlement occurs in tokenized Swiss franc central bank money.
Global tokenized RWA market: Total tokenized real-world assets (excluding stablecoins) reached approximately $31-34 billion by mid-2026, up from roughly $6 billion in early 2025. Tokenized fixed income — primarily U.S. Treasuries — accounts for approximately $10 billion of this total, with tokenized corporate bonds at approximately $1.77 billion globally. India's $107.2 million pilot represents roughly 6% of the global tokenized corporate bond market by value.
India's distinction lies in the regulatory architecture: bonds are issued on depository-owned infrastructure, not on a public or permissioned chain external to the securities regulatory framework. The cash leg settles in central bank money. No separate regulatory carve-out or exemption was required.
The pilot operates within SEBI's Regulatory Sandbox, a controlled environment for testing financial innovations under modified regulatory conditions. Key regulatory features:
SEBI Chairman Tuhin Kanta Pandey co-launched the pilot alongside RBI Governor Malhotra, signaling cross-regulatory coordination. The initiative falls under SEBI's broader "Demat 2.0" vision for next-generation securities infrastructure.
The pilot is structured in three phases:
Phase 1 (Current): Primary issuance of tokenized corporate bonds to institutional investors. This phase is live as of September 2026.
Phase 2 (Expected December 2026): Secondary trading through existing request-for-quote (RFQ) platforms operated by stock exchanges. Exchanges are expected to have the necessary infrastructure ready by December 2026. This phase will test whether tokenized bonds can trade on the same platforms as conventional bonds, with atomic settlement on the back end.
Phase 3 (Timeline TBD): Retail investor access. SEBI has indicated that retail participation will follow after institutional phases demonstrate operational stability. No specific date has been announced.
The phased approach is deliberate. India's corporate bond secondary market has historically been illiquid relative to the primary market: FY25 saw record ₹9.9 trillion in fresh issuances but muted secondary trading volumes. If atomic settlement reduces friction and counterparty risk in secondary trading, it could improve turnover ratios — a longstanding policy objective for Indian bond market regulators.
India's corporate bond market, at ₹53.6 trillion ($627 billion) outstanding, represents approximately 22.5% of the country's total debt market (₹240 lakh crore / $2.8 trillion). The market has grown at a compound annual growth rate of approximately 12% over the past decade.
Three structural implications follow from the Demat 2.0 pilot:
1. Compressed issuance timelines: Same-day access to proceeds could increase the attractiveness of bond issuance for corporates that currently face T+1 or T+2 delays. For frequent issuers like REC (a Maharatna CPSE), the working capital benefit is ongoing.
2. Potential expansion beyond bonds: SEBI Chairman Pandey stated that the Demat 2.0 framework could eventually extend to equities, mutual fund units, and electronic gold receipts. If the corporate bond pilot succeeds, the same depository DLT and CBDC settlement infrastructure could serve other asset classes without new regulatory frameworks.
3. Infrastructure precedent for other emerging markets: India's approach — embedding tokenization within existing regulatory structures rather than creating parallel regimes — offers a template for markets seeking to modernize settlement without disrupting legal frameworks. The combination of depository-owned DLT and wholesale CBDC is replicable by jurisdictions with centralized depository systems.
The Demat 2.0 pilot is structurally significant not for its $107.2 million size — which is modest relative to India's $627 billion corporate bond market — but for the infrastructure decisions it represents. By placing the distributed ledger within depository ownership and settling in central bank money, India's regulators have chosen an integration path over a disruption path. Existing market participants, legal frameworks, and disclosure requirements remain unchanged; the settlement backend is what moves to DLT.
Whether this architecture scales will depend on Phase 2 execution: secondary market trading infrastructure, exchange integration, and participant onboarding at scale. The December 2026 target for secondary trading will be the first real test of throughput and market adoption. If atomic settlement demonstrably improves liquidity in India's historically illiquid secondary bond market, the case for expanding Demat 2.0 to other asset classes strengthens materially. If not, the pilot remains an infrastructure experiment with limited market impact.
The data will determine the outcome. The architecture, for now, is in place.