India just entered the tokenized bond market. REC Ltd., the state-owned power sector financier, issued the country’s first tokenized corporate bond, with HDFC Bank and ICICI Bank among the roughly 20 institutional investors who snapped up the offering.
The bond raised ₹500 crore (approximately $59 million) at a coupon rate of 7.30%, with a tenor of about one year and nine months. Demand wasn’t exactly tepid: bids totaled around ₹796 crore, making the issuance nearly eight times oversubscribed against its base issue size.
How the tokenized bond actually works
In this case, ownership records for the bonds live on a distributed ledger rather than in legacy depository systems. Settlement happened atomically, meaning the exchange of securities and cash occurred simultaneously through the Reserve Bank of India’s wholesale Central Bank Digital Currency. The result: same-day pay-in and listing on both the National Stock Exchange and the Bombay Stock Exchange.
The technical infrastructure relies on what’s being called DEMAT 2.0 securities accounts, an upgrade from India’s existing dematerialized account system. To participate, institutional buyers needed access to both these new accounts and RBI wholesale CBDC wallets.
One important distinction worth noting. This is not a crypto product. No public blockchain tokens or crypto assets are involved in the transaction. The distributed ledger is permissioned and sits within the regulatory perimeter of SEBI and RBI.
The regulatory sandbox approach
The issuance operates under the Securities and Exchange Board of India’s regulatory sandbox framework. Access is limited exclusively to qualified institutional investors. The restriction serves a dual purpose: it contains risk while generating the kind of institutional data that regulators need before deciding whether to scale the framework more broadly.
India’s approach mirrors what other major markets have been doing. Europe has seen tokenized bond issuances from sovereign and corporate issuers under the EU’s DLT Pilot Regime. Hong Kong has run its own tokenized green bond program.
Why the oversubscription matters
Atomic settlement eliminates counterparty risk during the settlement window. Same-day listing means investors can access secondary market liquidity immediately rather than waiting through the typical T+1 or T+2 cycle.
The participation of HDFC Bank and ICICI Bank, India’s two largest private sector banks by market capitalization, adds significant weight. These are systemically important financial institutions whose involvement signals that tokenized bonds have crossed from concept to credible infrastructure.
Follow-on issuances already appear to be in the pipeline. L&T, one of India’s largest engineering and construction conglomerates, has reportedly proposed its own tokenized bond offering.
For global markets watching India’s experiment, the integration of a wholesale CBDC into the settlement layer is perhaps the most interesting element. Most tokenized bond projects elsewhere have relied on commercial bank money or stablecoin equivalents for the cash leg. India’s use of central bank digital currency for atomic settlement creates a template that other central banks exploring wholesale CBDCs could replicate.