Originally published at https://tekmag.thsite.top/india-begins-tokenizing-its-620-billion-corporate-bond-market/
Demat 2.0 is a blockchain pilot program that issues Indian corporate bonds as digital tokens on a private permissioned ledger and settles each trade atomically with the digital rupee, and it targets a corporate debt market worth around $620 billion.
Key Takeaways
- The launch: SEBI and RBI unveiled Demat 2.0 at the Global Fintech Fest 2026 in September 2026, presented by SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra.
- Real issuers, real money: three corporates have raised a combined ₹1,025 crore, roughly $107 million, across REC, Larsen & Toubro, and IIFL Finance.
- It runs on existing rails: the ledger is operated by India's two statutory depositories, NSDL and CDSL, so investors use the demat accounts they already hold and no fresh KYC is required.
- Settlement is atomic: the token and the e₹-W payment exchange in one step through the RBI's wholesale digital rupee, removing the delivery-versus-payment gap that sits between a bond trade and its cash.
- The endgame is retail: secondary trading and direct retail access are planned for later phases, aimed at a corporate bond market valued at about $620 billion.
What Demat 2.0 Is and What It Replaces
Demat 2.0 is a pilot that turns a corporate bond into a token held in a demat account, and it replaces a sequence of separate steps with a token plus a single atomic payment. The program was announced at the Global Fintech Fest 2026 by SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra. SEBI's own launch notice describes it as a pilot for tokenised corporate bonds, and the reporting from Decrypt's coverage of India's move into tokenized debt confirms the pilot is live rather than a white paper.
What actually gets replaced is the delivery-versus-payment gap. In the current system a bond is already dematerialized, meaning it exists as an entry in a central registry rather than on paper, but the record and the cash settle on separate rails. Demat 2.0 makes the token and the rupee move together, so the transfer of ownership and the transfer of value happen as one event.
How the Pilot Works: Ledger, Settlement, and Smart Contracts
The plumbing runs on a private, permissioned ledger operated by India's statutory depositories, NSDL and CDSL's depository unit. Permissioned is the word that matters: participants are known and approved, which is how SEBI keeps the legal and investor-protection framework intact on a blockchain. Because the ledger sits inside the depository system, an investor uses the demat account they already hold and no new KYC is required, which lowers the barrier to participation.
Settlement is where the design gets specific. The ledger connects to the RBI's wholesale digital rupee, e₹-W, through a unified market interface, so the token and the rupee transfer in one atomic step. According to the Reserve Bank of India's digital currency program, e₹-W is built for institutional settlement, and that is exactly the role it plays here. Smart contracts then handle the recurring payments: interest and redemption are encoded and fire automatically instead of being processed by a trustee's back office.
That last point is the quiet part of the whole system. The token's behavior, its coupon, its maturity, is set by rules in code. That is the same logic behind a blockchain network's own monetary policy, where a change like the doubling of Solana's disinflation rate is just another set of on-chain parameters being updated. Encoding interest and redemption that way means the schedule runs without a person touching it at each payment date.
Three Issuers, ₹1,025 Crore, and a $620 Billion Target
The pilot has already produced real issuance. According to Decrypt's reporting, three corporates have raised a combined ₹1,025 crore, roughly $107 million at about ₹95 to the dollar. The breakdown: REC, a state-owned power finance company, issued ₹500 crore to 18 investors on September 7, 2026; Larsen & Toubro issued ₹500 crore; and IIFL Finance issued ₹25 crore.
The size of the prize is what makes a three-issuer pilot worth attention. India's corporate bond market is worth around $620 billion, and the country is one of the least digitized of the large bond markets. That gap between market size and infrastructure is the whole point: tokenization is an attempt to close it, starting with a handful of issuers and a settled, live ledger.
India vs Hong Kong: Two Different Ways to Build
The useful comparison is Hong Kong, which is further along in tokenized bond infrastructure. According to Cointelegraph's account of Hong Kong's program, the city issued HK$10 billion, about $1.28 billion, in tokenized government bonds in the fourth quarter of 2025, and its clearing subsidiary CMU OmniClear is building a dedicated digital asset platform for issuance and settlement. Hong Kong pairs that with stablecoin licensing, digital asset dealer and custodian rules, and OECD CARF tax compliance aimed at 2027.
India takes a different path, and the difference is deliberate. Where Hong Kong embeds tokenization into exchange and clearing infrastructure, India plugs it into the depository system it already runs. The ledger belongs to NSDL and CDSL, not to a new exchange unit, and settlement runs on the RBI's digital rupee rather than a private stablecoin. That is the distinction this whole program rests on. India settles in a central-bank currency, not a private stablecoin, a posture that mirrors the shift in how central banks are rethinking money and digital issuance but applies it to bonds instead of to the currency itself.
The two models also differ on who can participate. Hong Kong's offering so far is institutional and government-led, while India's pilot is corporate and, in its stated future phases, aimed at retail. The implication is that India is using tokenization to open up a market, not just to modernize a clearing system.
What Stays the Same: Ratings, Trustee, and Listing Rules
One line from the launch deserves to be repeated, because it answers the first question most institutional readers would ask. The bonds keep their existing legal terms, credit ratings, debenture trustees, and listing rules. SEBI's framing is that tokenization changes the form of holding and settling, not the substance of the instrument or the protections around it.
That is a conservative choice, and it is part of why this is a pilot rather than a full rollout. The token is a wrapper over a bond that still clears through the same regulatory and trust structure. The trade is speed and reduced settlement risk in exchange for keeping every legal invariant in place, which is the posture a regulator takes when it wants adoption without first rewrites to the law.
If India's markets are on your watchlist, the number to track next is whether secondary trading opens. It is the first signal that tokenized bonds can move from a launch statistic to a live, liquid market, and it is the step that turns the $620 billion figure from a target into a trading venue.
Conclusion
Demat 2.0 is a live SEBI and RBI pilot that issues corporate bonds as tokens on a depository-run permissioned ledger and settles them atomically in the digital rupee. Three issuers have raised ₹1,025 crore so far, with secondary trading and retail access planned for later phases against a $620 billion market.
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Frequently asked questions
What is Demat 2.0?
Demat 2.0 is a pilot run by SEBI and RBI that issues and settles Indian corporate bonds as blockchain tokens on a private permissioned ledger, replacing the current dematerialized-registry pipeline with tokenized holding and atomic settlement. It was unveiled at the Global Fintech Fest 2026 in September 2026.
How much have the pilot issuers raised so far?
Three issuers have raised a combined ₹1,025 crore, roughly $107 million at about ₹95 to the dollar. The amounts are REC ₹500 crore, Larsen & Toubro ₹500 crore, and IIFL Finance ₹25 crore, with REC's issue going to 18 investors on September 7, 2026.
What is e₹-W and why is it used for settlement?
e₹-W is the RBI's wholesale digital rupee, a central-bank instrument built for institutional settlement. Demat 2.0 settles the token and the rupee in one atomic step through a unified market interface, which removes the delivery-versus-payment risk that sits between a bond trade and its cash. Using a central-bank currency rather than a private stablecoin is the defining choice in India's design.
Do investors need new accounts or extra KYC to take part?
No. Because the ledger is operated by the existing statutory depositories, NSDL and CDSL, participants use the demat accounts they already hold and no fresh KYC is required. Retail access and secondary trading are planned for later phases of the program.
How is India's approach different from Hong Kong's tokenized bond program?
Hong Kong embeds tokenization into exchange and clearing infrastructure, with HK$10 billion, about $1.28 billion, in tokenized government bonds issued in the fourth quarter of 2025 and a dedicated digital asset platform under build. India instead plugs tokenization into its existing depository system and settles in the digital rupee rather than a stablecoin, keeping the legal, rating, and trustee framework unchanged and aiming the program at corporate and eventually retail access.
References
- Decrypt: India Begins Tokenizing Its $620 Billion Corporate Bond Market (September 14, 2026)
- SEBI: Successful Launch of Demat 2.0 Pilot Project for Tokenised Corporate Bonds (September 2026)
- Cointelegraph: How Hong Kong is turning tokenized bonds into real market infrastructure (March 2026)
- Reserve Bank of India: Official Website (wholesale digital rupee, e₹-W program)
- CDSL: Official Website (depository operator)
- NSDL: Official Website (depository operator)
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