India's "Demat 2.0" pilot raises Rs 1,02.5 crore through tokenization of corporate bonds

The Securities and Exchange Commission of India completes the "Demat 2.0" pilot: Raising Rs. 1025 billion through tokenized corporate bonds

The Securities and Exchange Commission of India (SEBI)'s "Demat 2.0" pilot project has achieved remarkable results, successfully helping three issuers raise Rs. 1025 billion through tokenized corporate bonds involving 23 institutional investors across the country. The atomic settlement mechanism connects tokenized bonds to the wholesale version of the digital rupee payment system, which not only reduces transfer risks, but also accelerates the issuer's access to raised funds. Despite the introduction of new technology, tokenized bonds retain the rights of traditional investors, while subsequent pilot phases will introduce secondary market trading and regulated retail market participation.

Integration of pilot results and technology

The Indian securities regulator has completed three tokenized corporate bond issues with a total value of Rs 1025 crore in its "Demat 2.0" pilot project. These transactions introduced distributed ledger technology into India's mature corporate bond market while retaining existing investor interests.

According to the Securities and Exchange Commission of India, three companies participated in the institutional issuance phase of the pilot:

• REC Limited : The first transaction was completed on September 7 and raised Rs 50 billion from 18 institutional investors.
• L&T Ltd.: The transaction was followed by completion on September 9, receiving another Rs 500 crore from four investors.
• IIFL: Rs 2.5 crore was raised from an investor on the same day through the same infrastructure.

These three offerings together attracted approximately US$230 million (approximately Rs 1,02.5 billion) in funding from 23 investors. Notably, the pilot tested digital issuance, ownership recording, settlement and service processes within the framework of India's regulated securities.

Legal structure that retains traditional interests

"Demat 2.0" is controlled by India's depositories and records corporate bonds as native digital tokens on a distributed ledger. However, tokenization did not create new asset classes or change the legal nature of bonds.

Each tokenized instrument retains its original International Securities Identification Number (ISIN). The issuer also retains the original coupons, maturity dates, contractual terms, credit ratings, obligations and investor protection measures. Therefore, the economic and legal rights enjoyed by investors through traditional paperless corporate bonds are still completely preserved in the form of tokenization. This structure allows the Securities and Exchange Commission of India to test new settlement infrastructure while remaining familiar with regulatory safeguards.

Atomic settlement linked to wholesale digital rupee

Demat 2.0 linked to Reserve Bank of India's wholesale version of central bank digital currency via Unified Market Interface. This linkage allows security transfers and corresponding cash payments to occur in a coordinated transaction.

Atomic Settlement Completing these two operations simultaneously reduces the risks arising from the movement of securities and funds through different systems. In addition, the mechanism limits the possibility that one party fulfills its obligations while the other party does not complete the transfer. Under this arrangement, issuers can receive the raised funds on the day of bidding, while traditional corporate bond issuance usually takes two to three days to use the raised funds.

In addition to improving settlement speed, shared ledgers also allow authorized agencies to access the same verified holder records. This transparency reduces reconciliation efforts and reduces the likelihood of differences between records across organizations. Bondholders can directly collect the coupon or principal into their wholesale digital rupee wallet on a scheduled payment date. As a result, automated services can reduce errors and improve coordination between issuers, depositaries, investors and payment institutions.

Future Planning: Secondary Trading and Retail Access

The Securities and Exchange Commission of India has divided the "Demat 2.0" pilot into three phases under the "regulatory sandbox". The first phase focuses on institutional issuance, testing the infrastructure through regulated primary market transactions. Secondary market transactions and retail investor participation will be introduced in subsequent stages. In addition, these phases will also examine the use of tokenized bonds in a wider range of trading, settlement, custody and service activities.

India's pilot project combines distributed ledger technology with existing financial infrastructure under controlled regulatory conditions. It tests faster settlements, shared records and digital rupee payments while retaining traditional security measures, thereby promoting innovation and development in corporate debt markets.