The Securities and Exchange Board of India (SEBI) has launched the “Demat 2.0” pilot for corporate bonds.
The initiative was announced on September 11 by SEBI Chairman Tuhin Kant Pandey and Reserve Bank of India (RBI) Governor Sanjay Malhotra during the Global Fintech Fest in Mumbai.
The new system will allow corporate bonds to be issued, held and settled as digital tokens using Distributed Ledger Technology (DLT).
Payments for transactions will use the RBI’s wholesale central bank digital currency, the digital rupee (e₹).
Importantly, tokenisation will not change the legal identity of a bond. Its ISIN, coupon rate, maturity, rating, terms and conditions, and investor rights will remain unchanged.
What Is SEBI Demat 2.0?
Under the existing demat system, ownership of securities is recorded in a traditional database. Under Demat 2.0, corporate bonds will be created directly as digital tokens on a private and permission-based DLT network.
DLT is a shared digital record that can be updated and maintained by participating entities. For this pilot, depositories and exchanges will operate the ledger, while NPCI will support technology and implementation.
However, the official record of investors’ ownership will continue to remain with the depositories.
Another important feature is the connection between securities and money settlement. Demat 2.0 is linked with the RBI’s wholesale CBDC and Unified Market Interface to enable simultaneous delivery-versus-payment (DvP).
In simple terms, the bond will be transferred only when the corresponding payment is made. This can reduce the settlement risk between the buyer and seller.
How Will Demat 2.0 Benefit Investors?
One of the main expected benefits is faster settlement. SEBI said that under the existing process, funds can sometimes take two to three days to reach investors.
With Demat 2.0, securities and money can be settled simultaneously. This can allow investors to receive funds more quickly after selling corporate bonds.
Faster access to money can also help investors redeploy their funds into other investments without waiting for the usual settlement cycle.
The system can also use smart contracts to automate certain bond-related activities. Interest payments and repayment of the principal at maturity can be programmed according to predefined rules.
Under the proposed system, funds could be transferred to an investor’s CBDC wallet on the specified date. This could reduce some of the manual processes involved in corporate bond payments.
Do Investors Need a New Demat Account?
Investors will not need to open a separate demat account or complete a new KYC process for Demat 2.0. Tokenised bonds will remain linked to their existing demat accounts.
The holdings will also be reflected through the existing interface and holding statement provided by the depository.
Investors will not need to manage their own cryptographic private keys either. The responsibility for these keys will remain with the depository.
However, investors participating in the pilot will need a CBDC wallet through their bank for settlement of funds. With the investor’s consent, the existing demat account can be linked to the CBDC wallet.
Existing rules related to corporate bonds will also continue to apply. This includes regulations covering credit ratings, debenture trustees, listing, disclosures, investment eligibility and investor protection.
REC, L&T and IIFL Issue Tokenised Bonds
Three companies have so far issued tokenised corporate bonds under the pilot, with a total value of ₹1,025 crore.
REC issued a ₹500 crore bond on September 7, 2026. The issue had 18 investors, carried a 7.30% coupon and had a maturity of around 20 months.
L&T raised ₹500 crore through tokenised bonds on September 9. Four investors participated in the issue. The bonds offered a 7.40% coupon and had a three-year maturity.
On the same day, IIFL issued tokenised bonds worth ₹25 crore. These bonds carried a 9.10% coupon and had a two-year maturity.
At the initial stage of the pilot, participation is limited to institutional investors.
When Can Retail Investors Buy Tokenised Bonds?
Retail investors cannot currently buy or sell corporate bonds through the Demat 2.0 system. SEBI plans to introduce wider participation in phases.
The first phase focuses on issuing tokenised bonds by connecting the system with existing electronic bidding platforms. Institutional investors are the main participants at this stage.
The second phase is expected to introduce secondary-market trading of tokenised bonds. SEBI does not plan to create a separate tokenised exchange. Instead, existing Request for Quote (RFQ) and OTC reporting platforms will be integrated with the DLT system.
These existing systems will continue to handle bond pricing, orders and trading reports. Retail investors are also expected to be included in this phase.
The pilot also allows peer-to-peer or demat-to-demat transfers through depositories before secondary-market trading begins.
In the third phase, other regulated entities, including credit rating agencies and depository participants, could be integrated into the system. The technology may also eventually be used for other financial instruments and corporate action processes.
Will Tokenisation Change the Corporate Bond?
Tokenisation does not create a new asset class. It changes how corporate bonds are recorded, transferred and settled.
The issuer’s obligation to repay the bond and the rights of investors will remain unchanged. The bond’s existing legal and financial features will also continue to apply.
Under the Indian model, corporate bonds are issued directly as digital tokens on DLT, while ownership is recorded by the statutory depository. Settlement of funds is carried out through the RBI’s CBDC.
For now, SEBI has limited the pilot to corporate bonds and is gradually expanding its scope. The next major step will be the introduction of secondary-market trading and wider participation, including retail investors.
