India launches tokenized bond pilot with $107M issued

India's securities regulator and central bank have launched a tokenized bond pilot program. This initiative has already seen three companies issue a combined 10.25 billion rupees (approximately $107 million) using new market infrastructure.

The Securities and Exchange Board of India (SEBI) announced that “Demat 2.0” facilitates the issuance and holding of corporate bonds as digital tokens on a distributed ledger. This ledger is managed by the country's statutory depositories and integrates with the Reserve Bank of India's (RBI) wholesale central bank digital currency (CBDC) through its Unified Market Interface.

Public-sector lender REC completed the first issuance, raising 5 billion rupees from 18 investors. Engineering conglomerate Larsen & Toubro (L&T) subsequently raised another 5 billion rupees from four investors, while non-bank lender IIFL issued 250 million rupees in bonds to one investor.

This new infrastructure allows issuers to receive funds on the day of bidding, a significant improvement over the previous two-to-three-day settlement period. SEBI stated that atomic settlement eliminates delays between money and bond movement, and smart contracts can automate interest and redemption payments.

This tokenized bond pilot expands beyond an initial plan reported in August, which anticipated a single REC issuance of less than 5 billion rupees. The current launch includes additional issuers and more than doubles the expected amount, with issuances under this first phase still ongoing.

SEBI indicated that future phases would introduce secondary trading through existing request-for-quote platforms and provide access to retail investors, with insights from the pilot guiding broader implementation. Investors can hold these tokenized bonds in existing Demat accounts without needing new accounts or Know-Your-Customer checks. However, participants must enable Demat 2.0 via their depository and maintain a wholesale CBDC wallet with a participating bank for settlement.

SEBI highlighted that India is the first country to combine natively issued bonds on a distributed ledger, ownership records maintained by statutory depositories, and CBDC settlement within existing regulated market infrastructure. The regulator affirmed that tokenization does not alter the legal status of the bonds, repayment obligations, or investor protections.