India Moves to Tokenize $620B Corporate Bonds With Digital Rupee

India starts tokenizing $620 billion corporate bond market with digital rupee settlement

India is preparing to launch its first tokenized corporate bond issuance in September, using blockchain-based infrastructure and the Reserve Bank of India’s (RBI) wholesale digital rupee for settlement, according to a Reuters report citing sources with direct knowledge of the plan.

The pilot issuance will be carried out by REC Limited, a state-owned power sector financier, and is expected to be valued at less than 5 billion rupees (about $57 million). The effort is being developed with the RBI and the Securities and Exchange Board of India (SEBI) as a limited investor test.

Tokenized bonds are debt securities whose issuance, ownership records, trading, and settlement are maintained on a blockchain or distributed ledger. The objective of the pilot is to test whether distributed ledger technology can shorten the process of issuing, recording, and settling corporate debt, with settlement occurring almost immediately once cash and securities move between participants.

A key feature of the structure is the use of the RBI’s wholesale central bank digital currency (CBDC) as the settlement asset for the cash side of the transaction. By settling the payment leg in wholesale digital rupees and recording bond ownership on connected digital infrastructure, the setup is designed to bypass the conventional electronic book provider system commonly used for debt placements.

To participate, investors will need access to two digital accounts:

• a wholesale CBDC wallet provided by a bank, and
• a DEMAT 2.0 securities wallet being developed by India’s depositories to record tokenized bond holdings on a distributed ledger.

One of the sources cited by Reuters said subsequent trades can take place only between participants that hold both compatible wallets. The bonds are expected to have an initial three-month lock-in.

Secondary market activity is expected to develop later. Exchanges are expected to build a secondary market for tokenized bonds by December, according to the information provided.

The launch follows groundwork disclosed earlier this year, when SEBI Chairman Tuhin Kanta Pandey said the regulator had approved a limited test of distributed ledger technology for corporate bond trading and settlement and estimated implementation could take six to nine months.

India’s corporate bond market is estimated at roughly 59 lakh crore rupees (about $620 billion), making the pilot a notable step in a large domestic debt market. The effort would also place India alongside jurisdictions such as Europe and Hong Kong that have been deploying blockchain-based approaches for debt securities issuance and settlement.