India is preparing to issue its first tokenised corporate bond as early as September 2026, according to sources with direct knowledge of the matter cited by Reuters. The issuer is REC Limited, a Maharatna-classified public sector enterprise and government-backed power-sector financier under the Ministry of Power. The bond will settle in the Reserve Bank of India's wholesale e-rupee, a central bank digital currency already used for interbank transactions and government securities. The deal is small by design: the issue size will be under ₹5 billion (roughly $57 million), and participation will be limited to a select group of investors.

The transaction sits against the backdrop of India's ₹59 lakh crore (approximately $70 billion) corporate bond market, which saw settled trading volumes rise 27.9 percent year-on-year to ₹21.2 lakh crore in FY25-26. Despite that growth, secondary market participation remains thin, with most institutional investors holding bonds to maturity. SEBI has framed the pilot as a test of whether tokenisation can address those structural inefficiencies by enabling faster settlement, programmable smart-contract features, and tighter integration with CBDC payment rails.

SEBI Chairman Tuhin Kanta Pandey first disclosed the initiative publicly on May 26 at the CareEdge Debt Market Summit in Mumbai, calling it "a pilot project on the use of digital ledger technology for tokenization of corporate bonds." He described the timeline as six to nine months at limited scale. Pandey has since characterised the work as an efficiency test that builds on existing market infrastructure rather than replacing it, according to reporting by Blockhead on August 11, 2026. SEBI's 2026-27 annual report listed the pilot among forward priorities and noted a working group, chaired by Dr. D.B. Phatak of IIT Bombay, that is developing a longer-term technology roadmap covering distributed ledger technology, tokenisation, and quantum-safe cryptographic systems. REC Limited, SEBI, and the RBI all declined to comment on the record for the Reuters report.

Investors who participate will need two wallets to hold and transact: a CBDC wallet to handle settlement in wholesale e-rupee, and a DEMAT 2.0 wallet, a new e-wallet format being developed by India's depositories NSDL and CDSL to record bond holdings directly on a distributed ledger. Tokenised bonds under this pilot will not trade on conventional electronic book platforms. A three-month lock-in period applies at launch, and exchanges are expected to develop a secondary market for these instruments by December 2026. The NSDL and CDSL have operated blockchain-based systems for monitoring security creation and bond-covenant compliance since 2021, so this is an extension of existing infrastructure, not a new build from scratch. The RBI also runs a CBDC and Asset Tokenisation (CAT) Sandbox, launched in late 2025, which provides a testing environment for related use cases. Beyond the sandbox, the RBI has deployed a Unified Markets Interface (UMI), a multi-layer platform designed to facilitate asset tokenisation with CBDC-backed settlement, and has conducted a parallel tokenised Certificate of Deposit pilot. Both initiatives indicate that the wholesale e-rupee rail is a tested system rather than an experimental one.

The selection of REC for the pilot appears designed to minimise counterparty risk. The company carries a government-backed credit profile, reported disbursals of ₹45,731 crore in FY25-26, and operates a borrowing programme of ₹1.70 trillion for the same fiscal year. Its market capitalisation stands at roughly ₹82,617 crore. One complicating variable: REC and Power Finance Corporation are proceeding through an in-principle merger approved by PFC's board in February 2026, which would eventually combine them into India's largest power-sector financier. That process is ongoing and could affect REC's role as a standalone issuing entity over time.

India's approach is structurally different from parallel experiments elsewhere in Asia and Africa. Hong Kong issued the world's single largest tokenised bond at HK$10 billion (about $1.28 billion) in the fourth quarter of 2025, with 21 institutions including J.P. Morgan, HSBC, UBS, Standard Chartered, HashKey, and Ant Digital, among others, involved in its expert group. In West Africa, Nigeria's NASD OTC exchange is targeting a September 2026 launch for tokenised shares and bonds on blockchain infrastructure provided by Canadian firm Blockstation, enabled by the Investments and Securities Act signed in March 2025. Kenya's Nairobi Securities Exchange signed a memorandum of understanding with Tether in July 2026 to explore tokenised bonds, equities, and commodities. The key distinction is the settlement layer: India's bonds clear in sovereign CBDC, anchored to central bank rails, while Kenya's framework, in particular, anchors on private stablecoin infrastructure. That difference carries material implications for systemic risk and regulatory oversight.

India's move also carries significance beyond its own borders. No comparable central-bank-backed distributed ledger settlement infrastructure exists in Bangladesh, Pakistan, or Sri Lanka, and a successful pilot could establish a binding precedent for South Asia's broader regulatory approach to tokenised debt. The transaction also sits entirely outside India's unresolved crypto trading policy debate, which encompasses open questions of taxation and exchange regulation, meaning it is unlikely to be entangled in that legislative uncertainty as it progresses.

India's legal framework for tokenised assets still has gaps. The Securities Contracts (Regulation) Act 1956 does not explicitly cover blockchain-based tokens, and India has no comprehensive tokenisation legislation comparable to the EU's MiCA framework or Switzerland's FINMA framework. A July 2026 analysis in the RMLNLU Law Review identified open questions around KYC enforcement for wallet addresses, AML compliance for fragmented token transfers, and the treatment of decentralised networks under existing securities law. The same analysis pointed to the Supreme Court's 2012 ruling in Sahara India Real Estate Corp. v. SEBI, under which tokenised real-world assets may qualify as securities by virtue of their economic reality and substance, as a potential foundation for regulatory jurisdiction over these instruments. SEBI is also participating in IOSCO's Tokenisation Working Group, which provides a degree of international coordination context as the domestic framework develops.

The pilot's permissioned architecture means it will not generate publicly accessible on-chain data. Builders or protocols seeking exposure to India's tokenised bond market will need to work through regulated intermediaries including depositories and banks. SEBI's stated long-term objectives include smart-contract programmability, and the CAT Sandbox represents a potential access point to watch as the framework matures beyond the September pilot.