India has begun testing a distributed ledger-based issuance and settlement system for corporate bonds. The pilot, named Demat 2.0, is led by the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI), covering the $620 billion corporate bond market and using digital rupees for settlement.
The first three companies have completed their issuances.
SEBI stated that Demat 2.0 enables corporate bonds to be issued and held in the form of digital tokens, with the relevant ledger managed by a statutory depository. The system also connects to the RBI’s wholesale digital rupee via a unified market interface, enabling synchronized bond delivery and fund settlement.
- REC issues 5 billion rupees in tokenized bonds
- Larsen & Toubro issues 500 million rupees
- IIFL Finance issued 25 million rupees.
In the first phase, three institutions collectively raised ₹1.025 billion, approximately $116 million. Despite being built on blockchain infrastructure, the coupons, maturity schedules, and investor rights of these bonds remain unchanged and continue to follow conventional bond terms.
Settlement efficiency is a key focus of the pilot program.
Regulators aim to shorten settlement times and reduce the risk of transaction failures. SEBI stated that India’s pilot integrates native distributed ledger bonds, statutory custodial records, and CBDC settlement within a single regulated market infrastructure.
Participating institutions are also integrated into existing financial networks, including NSDL, CDSL, NSE, BSE, HDFC Bank, and ICICI Bank. This means the pilot is not a standalone system but operates within the existing market framework.
Subsequent expansion to secondary trading
For investors, holding these tokenized bonds does not require opening a new separate account; they can remain in the existing Demat account, but the Demat 2.0 feature must first be enabled through the custodian. Institutions participating in settlement must also open a wholesale CBDC wallet through a partner bank.
SEBI plans to test secondary market trading in later stages by integrating with existing quote platforms. In even later stages, regulators will assess whether to open access to retail investors. This current $116 million pilot will initially be used to test whether tokenized bonds and digital rupee settlement can operate at a larger scale.