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India Launches Demat 2.0 With Tokenized Bonds and Digital-Rupee Settlement
SEBI Pilot Brings DLT, Atomic Settlement and Smart-Contract Servicing to Corporate Debt
TL;DR
- India’s SEBI has launched Demat 2.0, a pilot using distributed ledger technology for corporate bond issuance, holding and settlement.
- Three issuers raised a combined INR 1,025 crore through tokenized bonds, with settlement linked to the Reserve Bank of India’s wholesale digital rupee.
- The pilot begins with institutional issuance before expanding to secondary-market trading and retail access under SEBI’s Regulatory Sandbox.
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India has begun tokenizing corporate bonds through SEBI’s Demat 2.0 pilot, combining distributed ledger technology with the Reserve Bank of India’s wholesale digital rupee to support issuance, ownership records and settlement. The initiative, announced by the Securities and Exchange Board of India on Sept. 10, 2026, had already processed corporate bond issuance from three companies and targets a market valued at roughly $620 billion.
The information was published on Sept. 11, 2026. Demat 2.0 applies distributed ledger technology, or DLT, to securities infrastructure while keeping the underlying instruments within India’s regulated corporate bond framework. The securities are represented as native digital tokens on a distributed ledger controlled by depositories rather than being issued through an open, permissionless blockchain.
Three issuers had raised a combined INR 1,025 crore, valued at $107.2 million, through the pilot. REC Ltd., L&T Ltd., also known as Larsen & Toubro, and IIFL Finance completed the initial transactions as the program’s first phase focused on institutional issuance.
REC, the state-owned power-sector lender, completed the first issuance under the pilot. L&T followed with an issuance of the same rupee size but to a smaller investor group, while IIFL Finance completed the smallest of the first three transactions. The differing dollar figures attached to the REC and IIFL transactions reflect separate conversions of the same rupee-denominated issuance amounts rather than different bond sizes.
Tokenized Bonds Keep Existing Rights and Terms
Demat 2.0 does not create a separate class of corporate debt. SEBI said bonds issued through the pilot retain the same ISIN and continue to carry the same issuer obligations, coupon, maturity, covenants, credit rating and investor rights as conventional dematerialized bonds. The securities therefore remain conventional corporate debt instruments even though their issuance, ownership records and settlement are handled through distributed-ledger infrastructure.
The bonds also retain fixed interest rates and established maturity dates. Investors continue to use the demat-account structure already used for holding stocks and bonds, while the distributed ledger changes the infrastructure used to record and process the securities rather than replacing the economic terms of the instruments.
Ownership records are maintained on a shared ledger accessible to authorized institutions. SEBI said: “On the shared ledger, the details of bondholder are visible to all authorized institutions at once, and payment in eINR reaches the bondholders' CBDC wallets on the due date.”
The shared-ledger model allows authorized institutions to work from synchronized bondholder information rather than separate ownership records requiring reconciliation. Demat 2.0 is also designed to support bond servicing after issuance, including interest payments and redemptions through smart contracts.
SEBI said the combination of digital issuance, shared ownership records, settlement and automated servicing could streamline the corporate bond lifecycle. “Taken together, these features are expected to make the issue, settlement, and servicing of corporate bonds faster, more efficient, and less error-prone,” SEBI said.
Wholesale Digital Rupee Connects the Cash and Bond Legs
Demat 2.0 links the tokenized securities ledger to the Reserve Bank of India’s wholesale central bank digital currency through the central bank’s Unified Market Interface. That connection allows the bond and the money used to pay for it to settle as part of a coordinated transaction.
The design supports atomic settlement, in which the securities leg and cash leg move together rather than through separate settlement processes. That structure is intended to reduce principal and settlement risk by preventing a buyer from transferring payment without receiving the bond, or a seller from transferring the bond without receiving payment.
Settlement through the wholesale digital rupee can also accelerate the point at which issuers gain access to funds. SEBI said issuers could receive proceeds on the same day after bidding, compared with the usual two to three days under the existing process.
Payments on the securities can continue through the same connected infrastructure after issuance. The reference to eINR reaching CBDC wallets on payment dates indicates that the system is designed to cover ongoing bond servicing as well as primary issuance and initial settlement.
The framework keeps both sides of a transaction inside regulated infrastructure. The bond is represented on a depository-controlled distributed ledger, while the payment leg uses central-bank digital money rather than a privately issued digital asset.
Pilot Starts With Institutions Before Secondary Trading and Retail Access
SEBI has organized Demat 2.0 as a three-stage pilot. The first phase centers on institutional issuance, which includes the completed transactions by REC, L&T and IIFL Finance.
Secondary-market trading is planned for a later stage, extending the distributed-ledger structure beyond primary issuance to transfers between investors after bonds have entered the market.
Retail investor access is also scheduled for a subsequent phase. Those later stages are expected to operate under SEBI’s Regulatory Sandbox, allowing the regulator to test expanded use of the infrastructure within a controlled framework before broader deployment.
The pilot therefore combines securities tokenization, regulated depository infrastructure, wholesale central bank digital currency and smart-contract servicing without changing the legal and economic characteristics of the underlying corporate bonds. Its initial deployment remains centered on institutional issuance, with secondary trading and retail participation planned as subsequent steps.
This article has been refined and enhanced by ChatGPT.
