India has launched its Demat 2.0 pilot, a major initiative by the Securities and Exchange Board of India and the Reserve Bank of India to tokenize the country's corporate bond market. The system integrates distributed ledger technology with the wholesale digital rupee to enable same-day atomic settlement. Three companies—REC, Larsen & Toubro, and IIFL Finance—have kicked off the pilot by issuing a combined 10.25 billion rupees (about $107 million) in tokenized bonds. Future phases plan to introduce secondary trading and fractionalized retail access.
Demat 2.0 pilot launch
- ▪The Demat 2.0 system allows corporate bonds to be issued and held as digital tokens on a distributed ledger owned by India's statutory depositories, while maintaining the bonds' conventional legal status and investor protections
- ▪The Securities and Exchange Board of India and the Reserve Bank of India launched the Demat 2.0 pilot on September 10, 2026, at the Global Fintech Fest in Mumbai to test tokenized corporate bonds
Wholesale CBDC settlement infrastructure
- ▪To participate in the Demat 2.0 pilot, investors must enable the system through their depository and maintain a wholesale central bank digital currency wallet with a participating bank to settle payments
- ▪The Demat 2.0 pilot connects the tokenized bond ledger to the Reserve Bank of India's wholesale central bank digital currency through its Unified Market Interface
Initial corporate bond issuances
- ▪Engineering conglomerate Larsen & Toubro raised 5 billion rupees from four investors, including SBI, Axis Bank, SBI Mutual Fund, and NSDL, on September 9, 2026
- ▪Public-sector lender REC raised 5 billion rupees (approximately $56 million) from 18 investors on September 7, 2026, as the first issuance under the Demat 2.0 pilot
- ▪Non-bank lender IIFL Finance raised 250 million rupees (approximately $2.8 million) from one investor on September 9, 2026, under the Demat 2.0 pilot
Atomic settlement mechanism
- ▪The Demat 2.0 infrastructure enables atomic settlement, allowing bond issuers to receive funds on the day of bidding instead of the conventional two to three days later
- ▪By linking tokenized bonds with digital rupee payments, Demat 2.0 allows both sides of a trade to settle simultaneously, reducing settlement risk if one leg of the transaction fails
Smart contract automation
- ▪The project will examine whether distributed ledger technology can integrate the security and settlement sides of transactions more closely while automating parts of asset servicing
- ▪The Demat 2.0 pilot utilizes smart contracts to automate corporate actions, including interest and redemption payments
Retail access expansion plans
- ▪Later phases of the Demat 2.0 pilot are planned to introduce secondary-market trading through existing request-for-quote platforms and eventually expand access to retail investors
- ▪The tokenization of financial assets under the Demat 2.0 framework could potentially allow a 10 lakh rupee bond to be split into 100 rupee units, reducing the cost of ownership for retail investors
Debatable claims
- ▪India should expand retail investor access to corporate bonds through tokenization
- ▪India should restrict asset tokenization to state-controlled permissioned networks
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