- SEBI and the RBI launched Demat 2.0, a pilot that issues corporate bonds as tokens on a permissioned ledger.
- Payment settles in the RBI’s wholesale digital rupee.
- REC, Larsen & Toubro and IIFL Finance completed the first issues under a regulatory sandbox.
India’s securities regulator and its central bank have moved corporate bonds onto blockchain rails. On September 10, the Securities and Exchange Board of India (SEBI) confirmed the launch of Demat 2.0, a pilot that lets companies issue bonds as digital tokens on a distributed ledger and settle the payment leg in the Reserve Bank of India’s wholesale digital rupee. SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra presented it jointly at the Global Fintech Fest in Mumbai. Three issuers have already raised a combined $116 million at current rates, and every dollar of it settled on-chain against central bank money.
The target is not small. India’s corporate debt market sits at about $620 billion, and SEBI is testing whether the pilot’s plumbing can eventually carry a meaningful share of it. For now the scope is narrow: private placements, institutional buyers, and a few blue-chip names willing to run their paper through untested infrastructure.
REC’s debut drew eight times the bids it needed
REC Limited went first. The state-owned lender priced a $57 million issue on September 7 through the electronic bidding platform of the National Stock Exchange, built on an $11 million base with a $46 million green-shoe option. Bids reached roughly $90 million, close to eight times the base size, and REC accepted $57 million at a 7.30% coupon for a tenor of one year and nine months. HDFC Bank and ICICI Bank took the paper, now listed on both the NSE and BSE, with pay-in, allotment and listing all on the same day. Larsen & Toubro followed with its own $57 million issue, and IIFL Finance closed the trio with $2.8 million. None of these bonds behaves differently in economic terms. The coupon, maturity, credit rating and holder rights stay as they were. What changed is how the instrument is recorded and how the trade closes.
State-owned
Private infra
Private NBFC
The real upgrade is buried in the settlement leg
Strip away the terminology and Demat 2.0 is a settlement upgrade. In a normal bond trade, the security and the cash clear a day or two apart, the familiar T+1 or T+2 cycle, and that gap is where counterparty risk lives: one leg can complete while the other fails. The pilot closes it with atomic delivery-versus-payment. SEBI links the bond ledger, run by depositories NSDL and CDSL, to the wholesale digital rupee through its Unified Market Interface. When a trade executes, the token and the e-rupee move in the same transaction, both succeeding together or not at all. For the issuer, cash arrives on the bidding day rather than days later. Investors need no new account or fresh identity checks either: the tokens sit inside the existing demat account, once the holder activates Demat 2.0 and holds a wholesale CBDC wallet at a participating bank.
Same government, opposite treatment for crypto
India has drawn a hard line between tokenized regulated assets and cryptocurrencies. The Demat 2.0 ledger is permissioned, controlled by statutory depositories, and settled in central bank money. No MetaMask, no permissionless validator set, no public token. SEBI called it the first time a country has combined natively issued distributed-ledger bonds, statutory depository records and CBDC settlement inside existing regulated infrastructure.
Contrast that with how the same government treats public crypto. Virtual digital assets carry a [flat 30% tax on gains with no offset for losses, plus a 1% tax deducted at source](https://cleartax.in/s/crypto-tax) on transactions, and they remain fenced off from the formal banking system. The message is consistent: blockchain as a settlement technology gets the state’s backing, while permissionless crypto as an asset class stays contained.
A thin repo market is the problem SEBI won’t name
The pilot reads as a settlement experiment, but a liquidity problem sits underneath it. India’s corporate bond repo market, where institutions borrow short-term cash against their holdings, is thin, turning over modest daily volumes and starving the market of the ready collateral that keeps secondary trading liquid. A bond that can be pledged and moved instantly on a shared ledger works far better as collateral than one stuck in a two-day cycle. Make these tokens pledgeable and unwindable in real time, and they become high-velocity collateral. That is where the deeper commercial case for Demat 2.0 sits.
Retail access and gold are next on the ledger
The current phase is issuance only, institutional, and primary-market. SEBI has mapped the rest in stages: secondary trading through existing request-for-quote platforms, then fractionalization that would let retail investors buy small slices of high-yield bonds usually priced beyond their reach. The ambition runs past bonds. SEBI and the RBI have signaled the same Unified Market Interface can later carry stocks, mutual fund units, electronic gold receipts and wholesale gold deposits, with coupon payments and redemptions handled by smart contracts.
India now joins a short list of jurisdictions pairing a wholesale CBDC with a tokenized asset layer. Hong Kong is doing comparable work through Project Evergreen, and the European Central Bank has trialed DLT settlement against central bank money. What sets the Indian version apart is how tightly it wires the experiment into infrastructure that already exists, the same depositories, exchanges and banks that clear the conventional market. The real test starts when secondary trading opens and the market has to price these tokens against their paper equivalents.