India’s bond market has just moved tokenisation from a policy conversation to a live market experiment.
Between September 7 and September 9, three issuers, REC, L&T and IIFL Finance, collectively issued ₹1,025 crore through the country’s first tokenised bond pilot. REC issued ₹500 crore on September 7, upsizing the issue from a ₹100 crore base after receiving around ₹796 crore in bids. Its one-year-nine-month bond carried a 7.30% coupon. L&T followed with a ₹500 crore, three-year bond at 7.40%, while IIFL Finance issued ₹25 crore.
On September 10, RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey formally unveiled the initiative at the Global Fintech Fest.
The regulators were not announcing a technology that might eventually be used. They were endorsing a system that had already processed real transactions. So, what does this actually mean for India’s debt market?
The Asset Remains the Same
The most important distinction is that tokenisation has not created a new kind of security.
The bonds have the same ISIN, credit ratings, trustee oversight, and legal rights as conventional bonds. What changes is the infrastructure underneath them.
Settlement takes place through the RBI’s wholesale Central Bank Digital Currency (CBDC), enabling same-day, atomic delivery-versus-payment. In conventional markets, settlement typically follows a T+1 or longer cycle.
“Demat 2.0” does not require investors to suddenly manage blockchain wallets or private keys. Depositories retain control of the keys, while the tokenised securities remain connected to investors’ existing demat accounts and KYC framework.
India is not attempting to build a crypto-native bond market. It is taking an existing regulated market and changing one layer of its infrastructure. As RBI Governor Malhotra put it at the Global Fintech Fest, “A financial system which moves at the speed of light but does not command trust will not see many takers.”
Faster Settlement Is Not the Same as Greater Liquidity
For all the significance of the first ₹1,025 crore, the pilot has not yet addressed the liquidity problem in India’s debt market. The tokenised bonds currently have a three-month lock-in, while a trading venue is targeted for December 2026. Until secondary-market trading begins, there is no evidence that tokenisation will make bonds meaningfully more liquid.
India has a debt market worth roughly ₹59 lakh crore, but a large majority of corporate bonds are held until maturity rather than actively traded. Faster settlement can make transactions more efficient, but efficiency does not automatically create a market. The pilot also offers no evidence yet of a pricing advantage. REC’s tokenised bond is priced broadly in line with conventional issuance.
That may be entirely rational. If the underlying security, investor base and legal rights remain unchanged, why should the yield be different simply because the settlement infrastructure is different? The answer may only emerge once secondary trading begins.
Scale is the next question
₹1,025 crore is meaningful as a proof of execution, but very small relative to India’s debt market. More interesting than the amount, however, is the fact that three issuers participated within a single week. This looks less like a one-off showcase transaction and more like a deliberately designed cohort testing whether the infrastructure can support different issuers and issuance sizes.
Retail participation, often presented as one of tokenisation’s biggest promises, is explicitly being positioned for Stage II. For now, this remains institutional-grade issuance using broadly the same investor base as the conventional market.
The new settlement pilot appears separate from the DLT-based covenant-monitoring infrastructure introduced through India’s depositories in 2021. There is currently no clear evidence that the two systems are being integrated. How these layers eventually connect could become important as tokenisation moves beyond issuance and settlement.
The Real Test Begins When the Bonds Start Trading
India has now answered the first question: can tokenised bonds be issued and settled within the existing regulated financial system? At pilot scale, the answer appears to be yes.
The harder question is, “Can tokenisation create liquidity where little exists today?” “Can secondary trading become more efficient?” “Can automated corporate actions reduce operational friction?” “Can broader participation eventually change how India’s bond market functions?”
That is where the real significance of “Demat 2.0” will be decided. Tokenisation in India’s bond market has gone from something reported but unconfirmed to something that has already happened. The technical experiment is underway. The market experiment begins next.
And the test is no longer whether the technology works. It is whether faster settlement can ultimately translate into a better market.