India Begins Tokenizing Its $620 Billion Corporate Bond Market

India has launched a pilot to issue and settle corporate bonds as blockchain tokens, an early move to bring distributed-ledger technology into a $620 billion market using the country's digital rupee.

The Securities and Exchange Board of India unveiled the program, dubbed "Demat 2.0," last week alongside the Reserve Bank of India, with SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra presenting it at the Global Fintech Fest.

Under the system, a corporate bond is issued as a native digital token on a private, permissioned ledger operated by India's statutory depositories, NSDL and CDSL.

Three companies have already tapped the framework, raising a combined 1,025 crore rupees, or about $107 million. State-owned lender REC went first on Sept. 7, raising 500 crore rupees from 18 investors in what it called India's first tokenized corporate bond, followed by Larsen & Toubro with another 500 crore rupees and non-bank lender IIFL Finance with 25 crore rupees.

The system links the token ledger to the RBI's wholesale digital rupee through a Unified Market Interface, enabling atomic settlement, where the bond and payment change hands simultaneously.

That can deliver proceeds to issuers on the bidding day rather than days later, while smart contracts can automate interest payments and redemptions.

SEBI stressed the bonds remain legally unchanged, retaining their credit ratings, debenture trustees, listing rules and investor protections, and said the market won't be fragmented. Investors can hold the tokens in existing Demat accounts without fresh know-your-customer checks. Later phases are set to introduce secondary trading and eventually retail access.

India has generally kept private cryptocurrencies at arm's length while embracing blockchain on its own terms, through its rollout of the RBI-backed digital rupee and a lawmaker's earlier push to use tokenization to widen investment access for the middle class.