Tokenized Corporate Bonds in India: 3 Issuances Raise ₹1,025cr

India’s corporate bond market, valued at $620 billion, is entering a new era of digital transformation with the launch of a pilot program to issue and settle corporate bonds as blockchain tokens using the digital rupee. This initiative, named Demat 2.0, was introduced by the Securities and Exchange Board of India (SEBI) in collaboration with the Reserve Bank of India at the Global Fintech Fest. As of now, three companies have utilized this framework to raise a combined amount of 1,025 crore rupees, equivalent to approximately $107 million, marking a significant step towards modernization in the financial sector.

The Demat 2.0 initiative in India represents a significant advancement in the corporate bond market, utilizing blockchain technology to enhance efficiency and transparency. Bonds under this system are issued as native digital tokens on a private, permissioned ledger operated by two national depositories, NSDL and CDSL. This setup ensures that only authorized participants have access to the blockchain, maintaining a secure and controlled environment for transactions.

These digital tokens are integrated with the Reserve Bank of India’s wholesale digital rupee through a Unified Market Interface. This connection facilitates what is known as atomic settlement, a process where the exchange of bonds and payments occurs simultaneously, reducing the time lag commonly experienced in traditional settlements. As a result, issuers can receive proceeds on the bidding day itself rather than waiting for several days.

Moreover, the use of smart contracts plays a crucial role in this framework by automating the management of bond interest payments and redemptions. This automation reduces the potential for human error and increases operational efficiency. Participants in this market can utilize existing Demat accounts to hold tokens, eliminating the need for additional Know Your Customer (KYC) processes, thus simplifying the transition towards this innovative financial model.

Three companies participated in the Demat 2.0 pilot: REC, Larsen & Toubro, and IIFL Finance. REC raised 500 crore rupees from 18 investors on Sept. 7, Larsen & Toubro raised 500 crore rupees, and IIFL Finance raised 25 crore rupees. These three issuances together amount to 1,025 crore rupees, approximately $107 million.

Under the Demat 2.0 framework, bonds remain legally unchanged with existing credit ratings, debenture trustees, listing rules and investor protections, and the market is not expected to fragment. Investors can hold the tokenized bonds in existing Demat accounts without fresh KYC checks. These features preserve current legal and regulatory arrangements while enabling token custody within existing account structures.

Future phases will introduce secondary trading and retail access. The pilot remains under the Demat 2.0 program.

India has generally kept private cryptocurrencies at arm’s length while adopting blockchain-based solutions through a Reserve Bank of India–backed digital rupee. Authorities have pursued efforts to widen investment access for the middle class. The Demat 2.0 pilot for tokenized corporate bonds has been launched within this regulatory and market environment. That combination of regulatory caution toward private cryptocurrencies and official support for digital-rupee projects constitutes the current backdrop for the tokenization initiative.

The Demat 2.0 pilot reflects a cautious regulatory tone and a forward-looking step in tokenizing corporate bonds in India. This overview outlines the regulatory and market context for the initiative.