India's securities regulator and central bank jointly unveiled a live tokenized bond infrastructure on September 10, 2026, raising ₹1,025 crore (approximately $121 to $124 million, depending on the conversion rate applied) across three corporate issuances. The program, called Demat 2.0, was announced at the Global Fintech Fest by RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey. It is the first system in the country to use distributed ledger technology (DLT) for the actual issuance and settlement of securities, not merely for monitoring them. SEBI has also asserted a broader global distinction: India is the first country to natively issue corporate bonds on DLT with statutory depository ownership records and wholesale CBDC settlement operating simultaneously, a claim that separates the program from single-issuer tokenization pilots in Singapore and Hong Kong.

What Was Issued

Three companies completed bond placements under the pilot before its public debut. REC Limited, a state-owned infrastructure finance company, issued ₹500 crore in bonds on September 7 at a 7.30% coupon rate with a 1.75-year tenor. The offering drew bids worth ₹796 crore against the ₹500 crore on offer, a coverage ratio of roughly 1.59 times. Larsen and Toubro followed on September 9 with a ₹500 crore issuance at 7.40% over three years, attracting four institutional investors. IIFL Finance raised ₹25 crore in the same window at a 9.10% coupon over two years. Roughly 20 institutional investors participated in the pilot overall, including HDFC Bank, ICICI Bank, Axis Bank, and Yes Bank.

How the Settlement Works

The core technical feature of Demat 2.0 is atomic delivery-versus-payment (DvP) settlement using the RBI's wholesale central bank digital currency, the e-rupee (e₹-W). In a conventional bond settlement, the transfer of the security and the transfer of cash happen through separate systems and can take multiple days, creating a window of counterparty risk. Under this pilot, both legs settle simultaneously on the day of issuance, T+0, through a connection between the private permissioned DLT network and the RBI's wholesale CBDC infrastructure via a Unified Market Interface. NPCI is providing technical support for the platform. The network is owned and operated by India's two depositories, NSDL and CDSL, with stock exchanges also running nodes.

The pilot operates under SEBI's Regulatory Sandbox Framework, which establishes the legal perimeter of the experiment and explains several of the design constraints below. This sandbox status determines what the system can do today and what conditions would need to be met before any broader expansion could proceed.

One design choice worth noting for builders: depositories hold the private keys on behalf of investors, not the investors themselves. Participants use an existing demat account extended into a Demat 2.0 account along with a CBDC wallet held at a participating bank. No new KYC is required. SEBI's rationale is regulatory continuity with the 1996 Depositories Act, under which depositories are the authoritative ownership record. This is not a self-custodial system, and it is not composable with public blockchain networks or DeFi protocols.

The Legal Framework Stays Intact

SEBI has been explicit that the bonds issued under this pilot carry no change in legal character. The same ISIN, coupon obligations, investor rights, and trustee duties under the Securities Contracts (Regulation) Act, 1956, apply as they would to any conventionally issued bond. According to reporting by Business Standard, SEBI characterized the position as follows: "The bond remains the same instrument in law, the company's obligation to repay is unchanged, and the rights of investors are unchanged."

KC Jacob, a partner at Economic Laws Practice, described the initiative in legal commentary published by Bar and Bench as "an important early step towards the next generation of India's securities-market infrastructure," noting the shift from DLT as a surveillance tool toward DLT for transactional functions. That earlier August 2021 SEBI circular had directed depositories to use DLT only for a Security and Covenant Monitoring System, making this a meaningful scope expansion.

What Comes Next and What Remains Unresolved

Secondary market trading is not yet available. Stock exchanges are targeting a December 2026 launch for OTC and RFQ-based secondary trading of the tokenized bonds. Retail access is planned for later stages of the rollout, along with expansion into equities, mutual fund units, and electronic gold receipts. India's corporate bond market currently sits at approximately ₹59 lakh crore (around $620 billion), with annual growth averaging 12% since FY2015, but secondary trading is thin and retail participation is negligible.

RBI Executive Director P. Vasudevan acknowledged the pilot while flagging outstanding issues: legal certainty around DLT-based settlement finality, data privacy on a permissioned ledger, and financial stability questions raised by instantaneous settlement cycles. Those questions remain open. RBI Governor Malhotra addressed the trust dimension at the launch: "A financial system which moves at the speed of light but does not command trust will not see many takers."

SEBI Chairman Pandey, who co-launched the program alongside Governor Malhotra, framed the initiative as a move toward "predictive market supervision," arguing that native DLT issuance would give regulators real-time visibility into ownership and settlement in ways that conventional infrastructure cannot provide. He had previewed the direction at the May 2026 Debt Market Summit, signaling an intent to modernize the mechanics of India's fixed-income markets.

The joint appearance of both the RBI and SEBI heads at the launch carries its own signal. The two regulators have historically operated with jurisdictional friction over financial products. Their coordinated public rollout of a wholesale CBDC-integrated capital markets system suggests a level of institutional alignment that would be a prerequisite for any expansion of the pilot beyond its current sandbox status.

India's program enters a field with active regional competitors. The Monetary Authority of Singapore has been running its own wholesale CBDC pilot for institutional fixed-income settlement. Hong Kong's Project Ensemble, a joint initiative of the Hong Kong Monetary Authority with institutions including HSBC and Standard Chartered, is testing tokenized asset settlement on a permissioned network. SEBI's global "first" claim rests specifically on the combination of statutory depository ownership records and live CBDC settlement operating together in a production issuance environment. Neither Singapore nor Hong Kong has yet deployed that configuration in a live setting. Regulators in Pakistan, Bangladesh, and Sri Lanka, who tend to track India's market infrastructure decisions closely, will likely be watching the December secondary market launch for evidence that the architecture performs at scale.