India Integrates Digital Rupee with Corporate Bond Market
India's corporate bond market is taking a significant step towards digitalization. The Securities and Exchange Board of India (SEBI) has launched the Demat 2.0 pilot, which integrates electronic accounts for investors with a blockchain-based infrastructure. This system issues corporate bonds as digital tokens, while payments are executed using the Reserve Bank of India's wholesale digital rupee.
As part of the pilot, state-controlled energy finance entity REC issued approximately 500 crore rupees ($56 million) in bonds this month, followed by Larsen & Toubro and IIFL Finance. The Demat 2.0 system connects the distributed ledger that maintains tokenized bond records with the central bank's wholesale digital rupee through the Unified Market Interface.
This integration aims to reduce settlement risk by completing both bond delivery and payment in a single transaction. The fundamental features of the bonds remain unchanged, including fixed interest rates, maturity dates, and investor rights. Smart contracts are used for managing interest payments and redemption processes.