By Pradiptarathi Panda
The capital market regulator and the banking regulator recently teamed up to test the tokenisation of corporate bonds. If this pilot scales effectively, it will demonstrate that a national depository system and a central bank’s digital currency can be integrated to strengthen market processes, writes Pradiptarathi Panda
l What is the Demat 2.0 pilot?
Demat 2.0 IS an initiative to speed up the issue and settlement process in the securities markets. It has been developed to test a new way of issuing, holding, trading and settling corporate bonds. The bond is created as a digital token on a Distributed Ledger Technology (DLT) network, a shared electronic record that multiple market infrastructure institutions can see and update simultaneously. Notably, ledger ownership stays with the depositories.
The Securities and Exchange Board of India (Sebi) chairman and the Reserve Bank of India (RBI) governor announced this initiative at the Global Fintech Fest in Mumbai on September 10, 2026.
l Why did RBI & Sebi join hands to launch this?
A bond transaction has two legs — securities and money. While the market regulator Sebi oversees the securities leg, the central bank oversees the money leg. The bond token lives on the depositories’ DLT ledger, while payments move through the Wholesale Central Bank Digital Currency (e`), with the two connected via the RBI’s Unified Market Interface (UMI). This enables automatic settlement of the bond and the cash movement as a single linked transaction, resulting in no counterparty risk and zero-lag settlement.
l Demat 2.0 vs existing demat accounts
The Demat 2.0 account is an extension of the investor’s existing demat account, and no fresh KYC is required. Registration is done through the depository’s interface, linking the demat account to the CBDC wallet with the required consent. The benefit is atomic settlement linking both legs – securities and funds – instead of the two to three days it takes in a conventional demat account.
l What are the benefits of tokenised bonds?
This initiative benefits both issuers and investors. For the issuer, the advantages are lower issuance cost, faster issuance by reducing file-sharing, reconciliation, and validation. The issuer receives funds on the same day bidding closes, compared with two to three days in the conventional process. Investors can also receive funds immediately by selling in the secondary markets. Under the smart contract, interest and redemption payments are credited to the bondholder’s e? wallet. The bond price, debenture trustees, credit rating, coupon rate, ISIN, and other characteristics are the same as those of conventional bonds, and they remain securities under the SCRA, 1956.
l How will it be implemented?
There are three stages in it.
Stage I: Current status
Three companies have already issued tokenised bonds through the Electronic Bidding Platform (EBP); these issuances are limited to institutional investors.
Stage II: Secondary trading and retail access
This will be carried out via the Request for Quote (RFQ) platform, providing retail investors with access to both the primary and the secondary market. An interim arrangement has been made for demat-to-demat transfers until this stage is operational.
Stage III: Wider infrastructure access
The ledger nodes may be extended to depository participants, credit rating agencies, and other regulated entities, as well as to other instruments, with automated corporate action benefits.
l How have other countries done it?
India is not the only country to implement bond tokenisation. The pilot was run by the Swiss National Bank’s Project Helvetia, in partnership with the Bank for International Settlements Innovation Hub, across six digital exchanges, testing settlement assets in wholesale CBDC. Its third stage moved from simulation to real transactions. Similarly, the Hong Kong government has issued tokenised Green Bonds since 2023. The USA issues treasury securities in the same manner, and asset managers such as BlackRock have built tokenised funds using JPMorgan’s Kinexys platform.
India follows a similar approach; the only difference is that, while the bonds are issued natively on a shared ledger, they are controlled by the country’s Sebi-recognised depositories instead of private platforms, as in other countries.
l Implications for securities markets
This initiative is being carried out under Sebi’s regulatory sandbox. If it scales effectively, it will demonstrate that a national depository system and a central bank’s digital currency can be closely integrated to strengthen market infrastructure and processes.
The writer is an assistant professor at Indian Institute of Management, Raipur,
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.