India launches institutional tokenized bond pilot; retail later

The Securities and Exchange Board of India launched a pilot programme called “Demat 2.0” to place corporate bonds and their cash settlement on linked digital rails. SEBI said the pilot ran its first transactions on Sept. 7 and Sept. 9 and the regulator announced the exercise on Sept. 10. The initial transactions moved a total of ₹1,025 crore across three issues.

REC Limited, Larsen & Toubro Limited and IIFL completed the tokenized bond issues. REC and L&T each issued ₹500 crore, and IIFL issued ₹25 crore. Each corporate bond was issued as a native digital token on a private, permissioned distributed ledger. Payments for the transactions used the Reserve Bank of India’s wholesale digital rupee for financial institutions.

SEBI stated the settlement was conducted as atomic delivery-versus-payment, meaning the bond token and the cash leg settle together or not at all. The token represents the bond itself and carries the same ISIN identifier, coupon, maturity, covenants, rating and security as the corresponding dematerialized bond. SEBI noted that issuer obligations and investor rights remain governed by existing regulations and that issuer credit risk is unchanged by tokenization.

India’s depositories continue to hold the statutory records of beneficial ownership and operate the network alongside market infrastructure institutions. The pilot uses a private network with validating nodes initially run by depositories and stock exchanges. Depositories also hold and manage investors’ private keys, keeping an intermediated custody model and preserving the existing custody chain.

Stage I of the pilot focuses on institutional issuance and ledger-based asset servicing. SEBI reserved secondary-market trading and retail participation for Stage II. Until Stage II begins, investors who wish to exit a position may transfer tokens peer-to-peer or use demat-to-demat transfers handled by depositories; payment for those transfers can occur through the wholesale digital rupee or through conventional banking channels outside the atomic settlement setup.

SEBI stated further Stage I issuances are ongoing as the regulator evaluates operational performance ahead of allowing broader liquidity and retail access in the next phase.