India Launches Tokenization of Corporate Bonds Worth $627 Billion

India has launched the tokenization of corporate bonds worth $627 billion through the Demat 2.0 pilot. The first deals have already totaled 10.25 billion rupees, or about $115 million.

The launch was announced by SEBI and the Reserve Bank of India at the Global Fintech Fest in Mumbai. The pilot is linked to the wholesale digital rupee. This is expected to speed up settlements.

What exactly did Demat 2.0 change?

Demat 2.0 moves corporate bonds into digital tokens on a distributed ledger. The ledger itself belongs to depositories, while settlements are processed through the RBI's Unified Market Interface.

Simply put, securities no longer live separately from money. The bond and the digital rupee move together.

This matters for those who buy or issue debt securities. Especially for large investors. They care about fast settlements and less manual work.

SEBI says the model should reduce errors and cut down reconciliations. That is no small thing.

Why is this launch important right now?

India's corporate bond market has already grown to 53.64 trillion rupees, or roughly $627 billion. That is about 22.51% of the country's entire bond market.

For comparison, according to Business Standard, in FY15 the volume of corporate bonds was 17.5 trillion rupees, and by FY25 it had risen to 53.6 trillion. This is a long-term trend, not a one-off spike.

There is also a historical parallel. Demat 1.0 in India launched in 1996 and eliminated paper shares. Now the country is trying to do the same with debt.

But there is a nuance. The market is large, while liquidity remains a weak point. This is where tokenization can provide faster turnover.

How have the first issuances already performed?

As of September 10, three companies had already issued tokenized bonds. Together they raised 10.25 billion rupees.

REC Limited became the first issuer in the pilot. On September 7, the company raised 5 billion rupees from 18 investors. The coupon was 7.30% per annum, the tenor was 1 year 9 months, and the order book reached about 796 crore rupees.

On September 9, L&T raised another 5 billion rupees from four investors. Its securities had a three-year tenor and a 7.40% coupon.

That same day, IIFL Finance placed 250 million rupees at 9.10%. This is a two-year issue, and it became the first tokenized bond issue from a non-PSU NBFC.

SEBI is betting not on the label, but on settlements. If the bond and the money move together, part of the risk between purchase and crediting funds disappears.

• The first stage has already brought in 10.25 billion rupees.

• REC raised 5 billion rupees from 18 investors.

• L&T also placed 5 billion rupees.

• IIFL Finance issued 250 million rupees.

• Settlements are linked to the wholesale digital rupee.

• The pilot will later be opened to RFQ platforms and retail investors.

What does this mean for investors?

The most practical change is simple: money can arrive on the trade date, not after 2-3 days. The same applies to the secondary market.

For investors, this means less waiting and less manual bureaucracy. For issuers, according to SEBI, it could lower issuance and servicing costs.

It is also important that the legal side does not change. Investor rights, credit ratings, debenture trustee requirements, listing, and disclosures remain in force.

In other words, this is not an experiment with property rights. It is a change in infrastructure.

Another detail for the market: investors do not need to open a separate account or go through KYC again. They only need an activated Demat 2.0 and a basket of wholesale CBDC rupees with a participating bank.

Frequently asked questions

What is Demat 2.0 in simple terms?

It is a new system for corporate bonds, where securities are converted into a token on a distributed ledger. Settlements go through the digital rupee, so the bond and the money are transferred at the same time.

Do investor rights change after tokenization?

No. SEBI keeps all basic rules in force: ownership rights, rating requirements, listing, and disclosure of information. Only the method of record-keeping and settlements changes.

When could the pilot be expanded further?

SEBI is already planning the next stage after the initial issuances. Next, buying and selling through RFQ platforms should be added, and then access will be opened to retail investors.

For the Indian market, this is a test of speed and trust. If the model takes hold, the debt market will get fewer delays and more transparency. Those who want to quickly sell Bitcoin on Monobank can do so without extra steps.

This material is not financial advice. Cryptocurrency trading involves significant risks. Part of this text was prepared with the help of artificial intelligence based on public sources and reviewed by our editorial team.