India Tokenized Bonds Advance as SEBI Expands Demat 2.0 Pilot

India's tokenized bond framework has made significant progress as SEBI expands its Demat 2.0 pilot, allowing corporate debt to link with wholesale digital rupees. The regulatory environment keeps existing investor rights and market rules intact.

The pilot has already seen three issuances from REC, Larsen & Toubro, and IIFL Finance, each issuing bonds worth ₹500 crore or less in the framework. The digital format does not change the essence of bonds; coupon rates, maturity terms, covenants, ratings, and other protections for investors remain the same.

India tokenized bonds are connected to RBI's wholesale digital rupee through the Unified Market Interface (UMI), enabling simultaneous settlement of security and payment legs. Private keys of investors' holdings are managed by depositories in the pilot framework, eliminating the need for special blockchain solutions or cryptographic keys.

The network operates as a private and permissioned one where initially nodes are operated by depositories and stock exchanges, with technical support provided by NPCI. This approach keeps existing legal prohibitions and control over instruments intact.