India launches tokenized bond pilot, raises $107M

India’s securities regulator and central bank have opened a tokenized corporate bond pilot that raised a combined 10.25 billion rupees (about $107 million) from three issuers. The pilot uses a new Demat 2.0 market infrastructure linked to the Reserve Bank of India’s wholesale central bank digital currency through the Unified Market Interface. Public-sector lender REC sold 5 billion rupees of bonds to 18 investors on Monday.

Engineering firm Larsen & Toubro issued 5 billion rupees to four investors on Wednesday, and non-bank lender IIFL placed 250 million rupees with one investor on the same day. Issuances in the first phase are ongoing while regulators assess operational and market effects. SEBI described Demat 2.0 as a framework that lets corporate bonds be created and held natively as digital tokens on a distributed ledger owned by India’s statutory depositories, with settlement routed through the RBI’s wholesale CBDC.

The infrastructure supports atomic settlement, which synchronizes the transfer of money and securities so issuers can receive funds on the day of bidding instead of waiting two to three days. Smart contracts on the ledger can automate interest and redemption payments and reduce manual settlement steps. SEBI emphasized that the tokenized format does not change the legal status of the bonds, repayment obligations or investor protections.

Investors can hold the tokenized bonds in their existing Demat accounts without opening new accounts or completing fresh know-your-customer checks, though participants must enable Demat 2.0 through their depository and maintain a wholesale CBDC wallet at a participating bank to settle payments. Later phases of the pilot will introduce secondary trading using existing request-for-quote platforms and will examine access for retail investors.

SEBI said the pilot combines native distributed ledger issuance, depository ownership records and CBDC settlement within regulated market infrastructure, a configuration the regulator described as unique globally. The experiment is intended to test whether tokenized issuance and CBDC settlement can speed settlement and reduce operational steps while operating within current market rules and protections.