India is set to launch tokenised corporate bonds next week during the Global Fintech Fest, with state-owned power financier REC successfully raising ₹500 crore ($52.92 million) through bonds maturing in one year and eight months. According to The Hindu BusinessLine, three merchant bankers confirmed on Friday that this marks India's first debt issue with instant settlement capabilities on a blockchain, positioning the country alongside major markets such as Europe and Hong Kong in using blockchain technology for issuance and settlement. The bonds will be issued using blockchain technology to enable instant settlement of bond transactions, with the Reserve Bank of India's digital currency facilitating these bond transactions. As reported by Reuters, India's markets regulator and the central bank are working together on pushing the technology, with a pilot issue set for launch in early September. Only investors with active security and CBDC wallets can participate in this upcoming sale, representing a significant milestone in India's financial digitisation journey.
The tokenised bonds will operate through a two-wallet system requiring both wholesale digital currency wallets for CBDC payments and new securities wallets called DEMAT 2.0 for distributed ledger record-keeping. According to Mint reports, the ownership record sits on a distributed ledger while payments move through the Reserve Bank's wholesale digital rupee, different from the retail Digital Rupee app used by the public. Vikaas M Sachdeva, CEO of BitDelta India, explained that the underlying instrument remains a conventional bond with the same credit exposure, interest payments, and principal repayment, but the ownership and settlement infrastructure changes to enable faster settlement. Business Standard reports that in the proposed REC pilot, the normal electronic book mechanism will continue to be used for the private placement and allotment of the bond, but after allotment, the tokenised bond will be held in a securities wallet called Demat 2.0. Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP, noted that investors may not have to open a second demat account or undergo separate know-your-customer process, as the securities will lie in Demat 2.0 while the digital rupee will be held in the CBDC wallet.
The September pilot involves REC and is structured with a base issue size of ₹100 crore, with REC retaining a greenshoe option of ₹400 crore, bringing the total potential raise to ₹500 crore ($52.92 million). As reported by The Hindu BusinessLine, bidding for the sale is set to take place on Monday, with the proposed REC issue expected to be below ₹500 crore, making it a significant milestone in India's financial digitisation journey. NDTV reports that the proposed REC issue is expected to be below ₹500 crore, making it a significant milestone in India's financial digitisation journey. Nishchay Nath, Founder & CEO of BondScanner, noted that the first Indian issuance is a pilot and is expected to be restricted to a select group of investors, emphasizing it should not be viewed as a retail launch yet. Secondary trading in tokenised bonds is expected to happen through exchanges only between participants who hold compatible wallets, after the reported lock-in period. Business Standard reports that the proposed system also envisages the existing trading infrastructure continuing to be used rather than creating a completely separate tokenised exchange, while coupon and redemption payments can potentially be automated through smart contracts.
According to Mint reports, India starts from a stronger base than many markets attempting this technology, since NSDL and CDSL have run blockchain-based systems for bond-covenant monitoring since 2021 and became operational in 2022. Manhar Garegrat, Country Head of Liminal Custody, noted that India's REC issuance is one of the few notable corporate bond offerings alongside the Siemens corporate bond in Germany and the Keyrock on-chain corporate bond in Switzerland. The benefits could include higher retail participation in debt instruments and higher liquidity for investors to make timely exits. NDTV reports that tokenisation allows fractional ownership of traditionally difficult-to-divide assets like houses, government bonds, or mutual funds, potentially opening products to wider investor pools. The Economic Times indicates that tokenised bonds are securities whose ownership, issuance, trading and settlement are recorded digitally on a blockchain or distributed ledger, with this launch placing India alongside major markets in using blockchain technology for financial innovation.
India currently lacks a dedicated legal framework for asset tokenisation, while the IFSCA's consultation approach is designed to recognise digital tokens representing ownership or beneficial interests and build mechanisms for issuance, trading, custody, clearing, and settlement. Industry and legal analysis places India's tokenisation market at around USD 3 billion, with a projection of USD 100 billion by the end of the decade, implying more than 30x growth potential from that base, as reported by FinanceFeeds. Business Standard reports that the eventual test will be whether better infrastructure translates into greater investor participation and secondary market liquidity, with cybersecurity, operational resilience, and interoperability requiring careful management as the system scales. Prabhkaran Singh Lalli, partner at Advonet, noted that what's interesting about this pilot isn't the tokenisation itself — it's that Sebi and RBI are finally letting securities settlement and payment settlement happen on the same rail, eliminating reconciliation delays that create most bond market friction. Nishchay Nath emphasized that settling money and securities on connected digital rails, in central bank money, is what makes the efficiency real through faster settlement with less counterparty and reconciliation risk, though this remains a controlled pilot open to select investors with no open secondary market yet.
