SEBI and RBI Launch Demat 2.0 Pilot with Rs 1025 Crore in Tokenised Corporate Bond Issuances

In a major leap forward for India's domestic debt market infrastructure, the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have formally launched the "Demat 2.0" pilot project. Announced jointly by RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey at the Global Fintech Fest in Mumbai, the initiative tests the issuance, holding, and settlement of corporate bonds in tokenised form using Distributed Ledger Technology (DLT).

The pilot launched with three inaugural corporate bond issuances totaling ₹1,025 crore:

• State-run infrastructure financier REC issued ₹500 crore in tokenised bonds.
• Engineering conglomerate Larsen & Toubro (L&T) raised ₹500 crore, drawing participation from institutional investors including State Bank of India, Axis Bank, and SBI Mutual Fund.
• Non-banking financial company IIFL Finance issued ₹25 crore under the pilot.

Atomic Settlement via RBI's Wholesale CBDC

The defining technical feature of Demat 2.0 is the introduction of atomic Delivery-versus-Payment (DvP). Demat 2.0 links the tokenised bond ledger directly with the RBI’s wholesale Central Bank Digital Currency (CBDC), or e-rupee, via the central bank’s Unified Market Interface (UMI).

Under conventional settlement rails, funds and securities move along disparate settlement cycles, requiring days for counterparty clearing and inter-bank reconciliation. Under Demat 2.0, securities and cash change hands simultaneously on the ledger: the bond and the digital rupee transfer at the exact same instant, eliminating trade settlement gaps and counterparty credit risks.

Automated Asset Servicing via Smart Contracts

Beyond primary issuance and transactional settlement, the platform embeds the lifecycle terms of the bond—such as coupon rates, record dates, payment conventions, and maturity schedules—directly into smart contracts on the depository-owned private ledger.

When coupon payment or maturity dates arrive, these self-executing contracts trigger distributions automatically, depositing principal and interest payments directly into bondholders' connected CBDC wallets without manual intervention, corporate registry reconciliations, or institutional delays.

Regulatory Continuity and Investor Impact

SEBI has emphasized that tokenisation does not change the legal classification, regulatory treatment, or underlying investor protections of the instrument. A tokenised corporate bond remains a regulated security governed by the Securities Contracts (Regulation) Act, 1956. The bonds retain standard International Securities Identification Numbers (ISINs), mandatory debenture trustee oversight, credit ratings, listing requirements, and full statutory disclosures.

Key Structural Features for Investors:

• No New Demat Accounts: The Demat 2.0 account functions as an integrated extension of an investor's existing depository account with NSDL or CDSL rather than an isolated silo.
• No Fresh KYC Required: Existing KYC credentials and depository registries are utilized, requiring participants only to link an eligible depository account to a designated CBDC wallet.
• Key Custody Managed by Depositories: Unlike decentralized crypto ecosystems, individual investors will not have to manage private cryptographic keys; private keys remain held and managed securely by the statutory depositories.

Phased Rollout to Secondary Markets and Retail

India is the first jurisdiction to roll out natively issued corporate debt on a distributed ledger maintained by statutory national depositories and settled through wholesale CBDC within existing market rails.

While the opening phase focuses exclusively on institutional bond issuances, SEBI plans to expand the sandbox in phases. Subsequent phases are slated to integrate Request-for-Quote (RFQ) and over-the-counter secondary market trading platforms into the DLT infrastructure, before eventually expanding participation to retail bond investors.

Tags: SEBI RBI Larsen & Toubro REC IIFL Finance Corporate Bonds