India’s $107 Million Demat 2.0 Pilot Could Turn the Digital Rupee Into the Settlement Rail for Tokenised Bonds

GETITFULLY  •  September 12, 2026

India has moved one of its most important financial-market experiments from theory into live transactions, with companies issuing a combined ₹10.25 billion — about $107 million — in tokenised corporate bonds through a new infrastructure linked directly to the Reserve Bank of India's wholesale central bank digital currency.

The initiative, known as Demat 2.0, is being tested by the Securities and Exchange Board of India in coordination with the Reserve Bank of India.

Instead of simply digitising a conventional bond, the project is testing whether securities themselves can be issued as tokens on a distributed ledger while the cash side of the transaction settles using central-bank digital money.

Three companies have already participated in the first phase: state-owned infrastructure financier REC, engineering giant Larsen & Toubro and non-bank financial company IIFL.

India Has Already Tokenised ₹10.25 Billion in Corporate Bonds

By the time the pilot was formally presented, three companies had completed bond transactions using the new infrastructure.

• REC: ₹5 billion in tokenised corporate bonds.
• Larsen & Toubro: ₹5 billion in tokenised corporate bonds.
• IIFL: ₹250 million in tokenised bonds.

Together, the transactions total ₹10.25 billion, equivalent to roughly $107 million.

The size of the first phase is notable because initial reports about India's experiment had focused primarily on a smaller REC transaction.

The addition of Larsen & Toubro and IIFL shows that regulators are already testing the model across multiple issuers rather than limiting it to a single demonstration.

What Is Demat 2.0?

Demat 2.0 is India's experimental infrastructure for issuing and holding tokenised securities.

Under the pilot, corporate bonds are represented as digital tokens on distributed-ledger infrastructure operated within India's regulated securities system.

The experiment has been developed through cooperation between market regulator SEBI and the Reserve Bank of India.

It also involves major institutions across India's financial-market infrastructure.

• National Securities Depository Limited, or NSDL.
• Central Depository Services Limited, or CDSL.
• National Stock Exchange, or NSE.
• Bombay Stock Exchange, or BSE.
• HDFC Bank.
• ICICI Bank.
• National Payments Corporation of India.
• Reserve Bank of India.
• Securities and Exchange Board of India.

The goal is to test whether distributed-ledger technology can be introduced without abandoning India's existing regulated market structure.

The Digital Rupee Handles the Cash Side of the Transaction

One of the most important parts of the experiment is how investors pay for the tokenised bonds.

Instead of using cryptocurrency or private stablecoins, settlement is connected to the Reserve Bank of India's wholesale central bank digital currency.

The wholesale CBDC represents central-bank money in digital form and is designed primarily for transactions between financial institutions.

India's Unified Market Interface links the tokenised securities infrastructure with the RBI's wholesale CBDC system.

This allows the security and the corresponding payment to move together.

Atomic Settlement Is the Real Technology Breakthrough

The central concept being tested is known as atomic delivery-versus-payment.

In simple terms, the bond is transferred only when the payment moves at the same time.

Both sides of the trade either complete together or do not complete.

That structure can reduce a traditional financial-market problem known as settlement risk.

Why Atomic Settlement Matters

1. An investor agrees to purchase a bond.
2. The tokenised security is prepared for transfer.
3. The investor's wholesale digital rupees are prepared for payment.
4. The security and money are transferred simultaneously.
5. There is no period where one side has delivered while waiting for the other side to complete.

The model could therefore reduce delays and some of the reconciliation work normally involved in financial-market settlement.

REC Became the First Issuer Under the Pilot

State-run infrastructure financier REC completed the first tokenised corporate bond issue under the framework on September 7.

REC raised approximately ₹5 billion through the transaction.

Its bonds carried a 7.30% annual coupon with a tenor of approximately one year and nine months.

Investor bids reached approximately ₹7.96 billion.

The issue had a base size of ₹1 billion and a green-shoe option of ₹4 billion.

REC ultimately accepted ₹5 billion.

REC's Bond Completed Pay-In, Allotment and Listing on the Same Day

One of the clearest demonstrations of the new infrastructure was the speed of the REC transaction.

Pay-in, allotment and listing occurred on the same day.

The bonds were listed on both the NSE and BSE.

Traditional bond issuance can involve a longer gap between bidding and the issuer actually receiving funds.

Under the tokenised framework, the infrastructure is designed to allow issuers to receive funds on the bidding day instead of waiting another two or three days.

Larsen & Toubro Followed With Another ₹5 Billion Issue

Larsen & Toubro became another major participant in India's tokenised bond experiment shortly after REC.

The engineering and infrastructure group raised approximately ₹5 billion through the system.

L&T's participation is particularly significant because it extended the pilot beyond a state-owned financial institution and into India's private corporate sector.

The company's tokenised bonds were reported to carry a coupon of approximately 7.40% and a three-year maturity.

IIFL Added a Smaller ₹250 Million Transaction

IIFL also participated in the opening phase of the tokenised bond programme.

The non-bank financial company issued approximately ₹250 million in tokenised bonds.

Combined with the REC and L&T deals, the IIFL transaction brought the first three issuances to ₹10.25 billion.

Tokenised Bonds Are Still Bonds — Not Cryptocurrencies

The word "tokenised" can make the experiment sound similar to cryptocurrency, but the distinction is important.

These instruments remain conventional corporate debt securities.

Investors still lend money to an issuer.

The issuer is still responsible for paying interest and repaying principal at maturity.

Investors retain the normal legal rights and protections associated with the underlying bond.

What changes is primarily the infrastructure used to represent ownership, process transfers and settle transactions.

Investors Do Not Need a Completely New Securities Account

Another important feature of India's approach is that it attempts to integrate tokenisation into infrastructure investors already use.

Participants do not need to create an entirely separate securities account or repeat the full Know Your Customer process simply because a bond is tokenised.

Tokenised bonds can remain associated with an investor's existing Demat account.

However, investors participating in the current pilot must activate access to the Demat 2.0 framework with the relevant depository.

The payment side also requires access to a wholesale CBDC wallet maintained through a participating bank.

The Pilot Currently Focuses on Institutional Investors

Demat 2.0 is still an experimental programme rather than a mass-market bond platform.

Participation in the current phase is restricted primarily to institutional investors equipped with the required securities and wholesale CBDC infrastructure.

That allows regulators to test the technology under controlled conditions before deciding whether it should be expanded.

Retail Investors Could Eventually Gain Access

The current institutional phase may only be the beginning.

Later stages are expected to explore secondary-market transactions through existing request-for-quote platforms.

Regulators also plan to examine whether tokenised securities can eventually be opened to retail investors.

If that happens, tokenisation could eventually influence how ordinary investors purchase and hold corporate debt in India.

Smart Contracts Could Automate Interest and Redemption

The first stage of the project focuses heavily on issuance and settlement, but the technology could eventually extend across the entire bond lifecycle.

One potential application is the automation of coupon payments.

Today, issuers or their registrars typically determine which investors own the bonds, calculate payments and process those payments through banking systems.

A shared ledger combined with programmable settlement infrastructure could allow smart contracts to automate some of those steps.

In the future, the system could potentially automate:

• Interest calculations.
• Coupon distributions.
• Ownership verification.
• Bond redemptions.
• Settlement instructions.
• Lifecycle record keeping.

The RBI's wholesale digital rupee could then provide the central-bank settlement asset for those automated transactions.

Why India Is Combining Tokenisation With a CBDC

Tokenised financial markets face an important question: if the security exists on a programmable digital ledger, what form of money should be used to pay for it?

Private stablecoins are one possible answer in some markets.

India is testing a different approach by linking tokenised securities directly to money issued by the country's central bank.

That allows regulated financial institutions to settle digital securities using a digital representation of central-bank money rather than relying on a private crypto asset.

The approach could ultimately make CBDCs an important piece of infrastructure for institutional capital markets rather than merely a digital replacement for physical cash.

This May Be More Important Than a Consumer Digital Rupee

Public discussion around central-bank digital currencies often focuses on consumers paying for everyday purchases with digital money.

India's tokenised bond experiment demonstrates another possible role.

Wholesale CBDCs could operate behind the scenes as settlement infrastructure for banks, bond markets and other financial institutions.

In that scenario, consumers may rarely interact directly with the technology even if it becomes an important part of the country's financial system.

Tokenisation Could Reduce Reconciliation Work

Traditional securities markets often depend on multiple institutions maintaining separate records.

Depositories, exchanges, banks, custodians and clearing systems may each hold different pieces of information that must ultimately be reconciled.

A shared distributed ledger can give authorised participants access to a synchronized record.

If implemented successfully, that could potentially reduce duplicate processing and improve the speed at which records are updated.

Potential Benefits Go Beyond Faster Settlement

Supporters of tokenised financial markets argue that distributed-ledger infrastructure could eventually provide several advantages.

• Faster settlement.
• Lower settlement risk.
• Reduced reconciliation between institutions.
• Greater transaction traceability.
• Programmable interest and redemption payments.
• More automated bond servicing.
• Potentially lower operational costs.
• Future opportunities for smaller investment denominations.

Whether these benefits appear at scale will depend on regulation, market adoption and the ability of different systems to work together.

The RBI Is Also Warning About the Risks

Indian regulators are not presenting tokenisation as risk-free.

RBI Executive Director P. Vasudevan has highlighted several challenges that financial institutions and regulators must address as tokenisation expands.

These include:

• Legal certainty.
• Data privacy.
• Data movement and consent management.
• Liquidity.
• Interoperability between tokenisation platforms.
• Potential concentration of infrastructure.
• Initial technology and implementation costs.

Interoperability could become especially important if multiple financial institutions eventually operate separate distributed-ledger systems.

A highly fragmented market could undermine some of the efficiency benefits that tokenisation is intended to create.

Blockchain Does Not Remove Credit Risk

Faster settlement does not make a weak bond safer.

Investors in tokenised corporate bonds still face the same fundamental questions they would consider with conventional debt.

• Can the issuer repay the principal?
• Can it continue making interest payments?
• How does the bond's yield compare with market rates?
• How liquid will the security be?
• What happens if the issuer defaults?

Tokenisation can change how the security is recorded and transferred, but it does not eliminate those underlying financial risks.

Secondary-Market Liquidity Will Be a Major Test

Issuing a tokenised bond is only one part of creating a functioning digital securities market.

Investors also need the ability to trade those instruments efficiently after issuance.

Future phases of India's programme are therefore expected to test secondary-market transactions.

The success of those tests could determine whether tokenised bonds remain a specialized institutional experiment or become part of mainstream Indian capital markets.

India Is Keeping Traditional Market Institutions Inside the New System

One of the most distinctive aspects of Demat 2.0 is that India is not attempting to bypass the institutions that already operate its financial markets.

Statutory depositories still maintain regulated ownership records.

Existing exchanges remain part of the distribution and listing process.

Banks provide access to settlement infrastructure.

SEBI and the RBI remain at the centre of supervision.

Distributed-ledger technology is therefore being introduced as an upgrade to regulated market infrastructure rather than as a parallel financial system.

Why the $107 Million Figure Matters Less Than the Infrastructure

Compared with India's overall corporate bond market, $107 million is relatively small.

But the importance of the pilot lies less in the amount of capital raised and more in what is being tested underneath the transactions.

India is attempting to connect three layers that are often discussed separately:

1. Tokenised financial assets.
2. Regulated securities-market infrastructure.
3. Central-bank digital money for settlement.

If those layers can operate together at scale, the technology could eventually affect how bonds and other financial assets are issued, traded, serviced and settled.

India Could Be Building a New Financial Rail Rather Than a New Asset

Demat 2.0 should therefore be viewed less as the creation of a new type of investment and more as a test of a new financial operating system.

The bonds themselves remain familiar.

The major change is underneath them: digital ownership records, programmable processes and central-bank digital settlement.

That distinction may ultimately determine why the experiment matters.

The biggest transformation from tokenisation may not come from creating exotic blockchain assets. It may come from quietly replacing parts of the infrastructure that financial markets have used for decades.

The Next Phase Will Show Whether Demat 2.0 Can Scale

India's first tokenised bond transactions have demonstrated that the infrastructure can process live corporate debt issuance.

The harder questions now concern scale.

Regulators and financial institutions will need to determine whether the system can support larger volumes, active secondary markets, more issuers and eventually retail participation while maintaining security and regulatory safeguards.

They will also have to demonstrate that the efficiency gained from tokenisation is meaningful enough to justify the cost of changing established financial infrastructure.

India's Digital Rupee May Find Its Most Important Role Behind the Scenes

India's ₹10.25 billion experiment provides an early glimpse at how central-bank digital currencies could evolve beyond consumer payments.

If the model succeeds, the digital rupee may eventually operate as a settlement layer connecting programmable securities with central-bank money.

That would make the RBI's wholesale CBDC an important part of the infrastructure underlying India's capital markets even if most ordinary investors never interact directly with it.

For now, Demat 2.0 remains a controlled pilot.

But the combination of tokenised bonds, regulated depositories, established exchanges and atomic settlement in central-bank digital money makes India's experiment one of the more significant tests of what a blockchain-based financial market could look like without abandoning the traditional regulatory system.