India has issued 1,025 crore ($116 million) in tokenized corporate bonds using the Demat 2.0 pilot. The bonds were issued in three transactions and settled using the Reserve Bank of India’s (RBI) wholesale digital rupee.
According to a statement by the Securities and Exchange Board of India (SEBI), Demat 2.0 connects a distributed ledger owned by India’s statutory depositories with the RBI’s Unified Market Interface, moving the bond and associated payment via atomic settlements.
India Issues $116 Million Using Demat 2.0 Pilot
REC Limited completed the first issuance on September 7, raising 500 crore from 18 investors. Larsen & Toubro completed the second 500 crore issuance on September 9, with IIFL issuing 25 crore later in the day. SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra announced the Demat 2.0 pilot at the ongoing Global Fintech Fest in Mumbai.
Demat 2.0 changes how ownership, settlement, and bond servicing are recorded, but does not change repayment obligations or create a new category of security. The tokenized bond retains its legal rights, fixed interest rate, and maturity date. Other requirements, including debenture trustees, credit ratings, exchange listings, and company disclosures, were also retained. Ownership records are held on a distributed ledger maintained by India’s regulated depositories.
Additionally, investors don’t need separate securities accounts or identity tests, and can hold the securities using their existing demat accounts. However, investors must activate Demat 2.0 with the relevant depository to participate.
India’s First Native Distributed Ledger Issuance Of Corporate Bonds
SEBI described Demat 2.0’s structure as India’s first native distributed-ledger issuance of corporate bonds, in which statutory depositories maintain ownership records while settlements are completed using central bank digital currency. India’s National Institute of Securities Markets valued the country’s corporate bond market at 53.64 lakh crore ($627 billion). However, only 1,025 crore has been issued through Demat 2.0, while SEBI has not disclosed the amount that will move into the system.
How Demat 2.0 Works
Demat 2.0 uses the Unified Market Interface to connect the bond ledger to the RBI’s wholesale central bank digital currency. Since it uses atomic settlements, the delivery of the tokenized security and payment in digital rupee are completed in a single transaction. Traditional bond systems use separate systems for allocating securities and transferring funds, with users receiving funds two or three days after the bidding process. Issuers using Demat 2.0 receive payment on the bidding day itself.
According to the regulator, atomic settlements remove the risk of partial transaction failure. The pilot also streamlines delivery services. Interest payments and bond redemptions can be programmed and delivered directly into an investor’s wholesale digital rupee wallet on their respective due dates. Currently, issuers must obtain the list of bondholders, manually calculate each payment, and send the funds through traditional banking channels. The Demat 2.0 pilot allows authorized institutions to share access to the ownership record and program instructions to trigger payments.
SEBI expects the pilot to substantially reduce manual file sharing, reconciliation, and validation work.
Issuers On The Demat 2.0 System
Three issuers have already tested the Demat 2.0 system. REC completed a 500 crore issuance on September 7. The company initially offered 100 crore with a 400 crore greenshoe option. Investors submitted 796 crore in bids, substantially exceeding the final amount. Larsen & Toubro completed the second transaction on September 9, with four investors purchasing its 500 crore bond. The third transaction was also completed on September 9, with IIFL issuing a 25 crore bond to a single investor.
Trading And Retail Access
According to SEBI, Demat 2.0’s first phase will focus on corporate bond issuance, with plans to connect tokenized bonds with existing request-for-quote platforms in the country. This would allow eligible investors to buy and sell securities after issuance, and keep trading within the regulated market structure. SEBI said that secondary market sellers could receive digital rupee funds instantly, but did not state when this phase would launch.
Retail participation is also in the pipeline. Individual investors will be able to use their existing demat accounts, but would need to activate Demat 2.0 access and a compatible digital rupee wallet.
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