India’s Securities and Exchange Board and Reserve Bank of India have started a corporate bond tokenization pilot that brings the country’s $620 billion corporate bond market onto distributed ledger infrastructure and uses digital rupees for settlement, according to the regulators’ disclosed framework for the initiative known as Demat 2.0.

The pilot is designed to tokenize corporate bonds while keeping their legal character unchanged. Regulators said the issuer’s payment obligations and investor rights remain the same, suggesting the project is focused on changing issuance, settlement and servicing infrastructure rather than altering the underlying instrument.

Under the system, tokenized bonds are connected to the RBI’s unified market interface, allowing securities and funds to settle atomically. Smart contracts are also set to automate interest payments and redemptions, a structure aimed at reducing manual post-trade processes in the bond market.

The first disclosed issuers in the pilot are REC, Larsen & Toubro and IIFL Finance. Their tokenized bond issuance totals ₹102.5 billion, made up of ₹50 billion from REC, ₹50 billion from Larsen & Toubro and ₹2.5 billion from IIFL Finance. That figure refers to the initial issuance under the pilot, not the full size of India’s corporate bond market.

Several details remain open, including the pace of broader trading access and the conditions under which individual investors could be included. The available information also points to a controlled rollout rather than a full migration of the entire market to distributed ledger rails at this stage.

Why It Matters

The pilot stands out because it combines regulated bond tokenization with central bank digital currency settlement inside an official market structure. That goes beyond a standalone blockchain proof of concept and places tokenized fixed-income infrastructure closer to mainstream financial-market plumbing.

It also adds to the growing policy focus on real-world asset tokenization, especially where regulators want efficiency gains without changing investor protections or issuer obligations. If the model scales, it could shape how other jurisdictions approach on-chain securities settlement under existing legal and supervisory frameworks.