India is preparing to launch its first tokenized corporate bond issue in September, marking a significant step in the country’s efforts to apply blockchain technology to securities markets, according to reports. State-owned power financier REC is expected to lead the pilot, potentially placing India among a growing group of financial markets experimenting with distributed ledger technology for bond issuance and settlement.
REC is expected to issue less than 500 crore rupees worth of tokenized bonds under the pilot, according to reports citing three sources familiar with the initiative. The offering is expected to be limited to a select group of investors, while details about the participating institutions have not yet been disclosed.
The pilot could be formally introduced at an annual financial technology event scheduled to take place in Mumbai next month, according to one of the sources.
The initiative is designed to test whether blockchain-based infrastructure can make bond issuance and settlement faster and more efficient while connecting digital securities with India’s central bank digital currency.
SEBI and RBI collaborate on digital securities
The Securities and Exchange Board of India and the Reserve Bank of India are jointly working on the initiative as authorities assess how distributed ledger technology can be incorporated into the country’s financial infrastructure.
Tokenized bonds represent securities whose ownership, issuance, transfer and settlement are recorded on blockchain or other distributed ledger systems. Unlike traditional securities infrastructure, which can involve multiple intermediaries and settlement processes, blockchain-based systems can potentially enable transactions to settle much faster.
The pilot is also expected to incorporate India’s central bank digital currency, commonly known as the digital rupee. Investors participating in the offering are expected to use the digital rupee to purchase the tokenized bonds, creating a system in which both payment and securities ownership can be handled through digital infrastructure.
Participants will reportedly require access to two separate digital accounts. One would be a wholesale CBDC wallet provided through a bank, while the other would be a newly developed electronic securities wallet.
DEMAT 2.0 to record bond ownership
India’s securities depositories are developing the electronic securities wallet, which has been described in reports as a first-of-its-kind system referred to as DEMAT 2.0. The wallet is expected to use distributed ledger technology to record investors’ holdings of tokenized bonds.
The proposed structure would also limit secondary transactions to investors equipped with compatible CBDC and securities wallets. This could create a closed digital ecosystem in which the movement of funds and securities occurs through interconnected infrastructure.
By linking the digital rupee with a distributed-ledger-based securities wallet, the pilot could allow regulators to assess how digital payments and tokenized securities can operate together within a controlled market environment.
Secondary market could follow in December
The tokenized bonds are expected to carry an initial three-month lock-in period. Stock exchanges are also reportedly planning to develop a secondary market for the securities by December, potentially allowing investors to trade the instruments after the initial restriction expires.
Unlike conventional bonds, the tokenized securities are not expected to use the existing electronic book provider platform for trading. Instead, transactions would take place through the new digital infrastructure being tested as part of the pilot.
The initiative comes as India continues to expand experiments involving digital financial systems. The combination of tokenized securities and the central bank digital currency could provide authorities with practical experience in managing blockchain-based issuance, payments and ownership records.
The pilot could also offer insights into whether distributed ledger technology can reduce settlement risks and operational complexity. Near-instant settlement may allow securities and payments to move through integrated systems with fewer procedural steps.
If the experiment performs as intended, the project could provide a foundation for broader adoption of tokenized securities in India’s capital markets. The planned REC issue therefore represents an important test of whether blockchain technology can support faster settlement, streamlined bond transactions and a more integrated digital securities ecosystem.
