India Launches Tokenized Bond Pilot Program

India’s securities regulator and central bank have launched a pilot for tokenized corporate bonds, with three companies raising a combined 10.25 billion rupees, or approximately $107 million, through the new infrastructure.

The Securities and Exchange Board of India (SEBI) announced on Thursday that its Demat 2.0 system enables corporate bonds to be issued and held as digital tokens on a distributed ledger operated by the country’s statutory depositories. The platform is connected to the Reserve Bank of India’s (RBI) wholesale central bank digital currency (CBDC) through the Unified Market Interface.

Three companies join tokenized bond pilot

Public-sector lender REC completed the first issuance on Monday, raising 5 billion rupees from 18 investors. Engineering conglomerate Larsen & Toubro (L&T) followed on Wednesday with another 5 billion rupees raised from four investors, while non-bank lender IIFL issued 250 million rupees in bonds to a single investor on the same day.

According to SEBI, the new infrastructure allows issuers to receive funds on the same day that bidding takes place, compared with the previous settlement period of two to three days. Atomic settlement eliminates the time gap between the transfer of funds and bonds, while smart contracts can be used to automate processes such as interest and redemption payments.

Pilot expands beyond initial plans

The launch is broader than initially expected. In August, reports indicated that India planned to test tokenized corporate bonds through an REC issuance worth less than 5 billion rupees involving a selected group of investors. The first phase ultimately expanded to include L&T and IIFL, taking the combined issuance to more than twice the amount initially anticipated from REC alone.

Issuances under the first phase are still underway. SEBI said future stages are expected to introduce secondary trading through existing request-for-quote platforms and eventually provide access to retail investors. Results from the pilot will help determine how the system could be expanded further.

Tokenized bonds settle through wholesale CBDC

Investors can hold tokenized bonds in their existing Demat accounts, meaning they do not need to create separate accounts or undergo additional Know-Your-Customer checks. Participants must, however, activate Demat 2.0 through their depository and maintain a wholesale CBDC wallet with a participating bank for settlement.

SEBI said India is the first country to combine bonds issued natively on distributed ledger technology, ownership records maintained by statutory depositories and CBDC-based settlement within existing regulated market infrastructure. The regulator also emphasized that tokenization does not alter the bonds’ legal status, issuers’ repayment obligations or the protections available to investors.

Sources:

https://www.sebi.gov.in/media-and-notifications/press-releases/sep-2026/successful-launch-of-demat-2-0-pilot-project-for-tokenised-corporate-bonds_104418.html

https://cointelegraph.com/news/india-launches-tokenized-bond-pilot-with-107m-issued