India’s securities regulator has begun testing the tokenization of corporate bonds on a regulated distributed ledger, with settlement conducted in the central bank’s wholesale digital currency. The pilot, known as Demat 2.0, links bond ownership records maintained by statutory depositories to the Reserve Bank of India’s wholesale digital rupee through its Unified Market Interface.

Three issuers have already completed transactions under the framework. State-owned power-sector lender REC raised 500 crore rupees, or about $56 million, from 18 investors. Engineering and construction firm Larsen & Toubro raised an identical amount from four investors. Non-bank lender IIFL Finance completed a smaller 25 crore rupee issuance, approximately $2.8 million, to a single investor. Combined, the deals total 1,025 crore rupees, or roughly $115 million.

How the Pilot Operates

Under Demat 2.0, corporate bonds are issued as digital tokens on a distributed ledger operated by India’s regulated depositories. Ownership remains recorded in investors’ existing demat accounts, so participants do not need new securities accounts or additional identity verification. Investors must, however, activate Demat 2.0 access with their depository and hold a wholesale digital-rupee wallet at a participating bank.

The bonds themselves retain their conventional characteristics. Fixed interest rates, maturity dates, repayment obligations and investor protections remain unchanged. Credit-rating requirements, debenture trustees, exchange listings and disclosure rules continue to apply. The legal status of the securities is unaffected by the tokenized form of representation and transfer.

Settlement occurs atomically: the tokenized bond and the corresponding digital-rupee payment move together as a single transaction. In traditional processes, securities allocation and cash transfer often travel through separate systems, leaving one party exposed if the other leg fails. Atomic settlement eliminates that window of risk and allows issuers to receive funds on the day of bidding rather than two to three days later.

Market Context and Regulatory Approach

India’s corporate-bond market is valued at approximately $620 billion. The pilot so far represents only a fraction of that total, and the regulator has set no formal target for the volume of bonds that will migrate onto the system. New primary issuances under the first phase remain open.

The structure positions India as the first jurisdiction to combine natively issued distributed-ledger corporate bonds, ownership records held by statutory depositories, and settlement in central-bank digital currency inside existing regulated market infrastructure. The approach keeps banks, depositories and central-bank money at the core rather than routing activity through open or permissionless networks.

Officials presented the pilot at the Global Fintech Fest in Mumbai. The Securities and Exchange Board of India and the Reserve Bank of India jointly described the initiative as a controlled experiment within the country’s established financial architecture.

Next Steps in the Pilot

Later stages are expected to introduce secondary-market trading through existing request-for-quote platforms. Eligible participants would then be able to buy and sell the tokenized bonds after issuance while remaining inside the current regulatory perimeter. Secondary sellers are projected to receive digital-rupee proceeds immediately, compared with the previous multi-day settlement cycle.

Retail investor access is planned for a subsequent phase. Individuals would continue to use their existing demat accounts, provided they have enabled Demat 2.0 and maintain a compatible wholesale digital-rupee wallet. Experience gathered across the issuance, secondary-trading and retail phases will inform any decision on broader adoption. No timetable for a full market rollout has been announced.

The pilot does not alter India’s cautious stance toward private cryptocurrencies. Tokenized bonds under Demat 2.0 settle exclusively in the central bank’s wholesale digital rupee and do not trade on decentralized exchanges or against privately issued stablecoins.