The Securities and Exchange Board of India is internally exploring the formation of a working group to study tokenisation of bonds using blockchain or distributed ledger technology infrastructure, according to sources familiar with the discussions. The proposed panel is likely to comprise technology experts, debt market participants, market infrastructure institutions and regulatory stakeholders to evaluate the feasibility of building tokenised debt market rails in India. The exercise is aimed at improving retail participation, liquidity and accessibility in India's corporate bond markets, which remain significantly underpenetrated compared to equity markets. People familiar with the matter said the broader objective is also to expand debt market penetration into tier 2 and tier 3 markets by lowering investment barriers and building wider digital distribution networks for bond products. As reported by Essential Business Intelligence, SEBI Chairman had recently said the regulator is already running a pilot around tokenisation of corporate bonds, while flagging concerns around regulatory oversight, cybersecurity safeguards and investor protection frameworks.
India's corporate bond market has achieved unprecedented growth, with debt market fundraising reaching nearly ₹9 lakh crore in FY26, almost double the amount raised through equity markets. As reported by The Economic Times, SEBI Chairman Tuhin Kanta Pandey highlighted that nearly ₹7 lakh crore had flowed into India's capital markets in FY25, demonstrating the growing importance of market-based financing. Speaking at the CareEdge Debt Market Summit in Mumbai on May 26, Pandey emphasized that a fast-growing economy needs a deeper debt ecosystem to support long-term capital requirements alongside the banking system. The chairman noted that India's growing economy requires patient debt capital and a strong bond market as a 'second engine of credit growth', with further regulatory measures needed to strengthen the debt market as a key avenue for capital raising. According to The Economic Times, regulation cannot remain static and must evolve continuously with emerging risks and changing market structures. NSE MD and CEO Ashishkumar Chauhan reinforced this vision, stating that India's vision of Viksit Bharat 2047 will require investments to rise from around 30% of GDP to over 35%, adding that bank lending alone cannot meet those financing needs.
India's corporate bond market has expanded sharply in recent years, with outstanding corporate bonds growing from ₹17.5 lakh crore to around ₹59.1 lakh crore in FY26, representing a 13.6% annual growth rate. However, SEBI believes structural gaps remain despite this growth, with the market remaining heavily concentrated across a limited set of issuers, ratings and sectors. According to Zee News, India's corporate bond market continues to lag global peers in size, liquidity and investor diversity, despite steady growth in issuances over the past decade. Pandey emphasized that bonds will attract retail investors only if investors properly understand the products and associated risks, stating that 'Corporate bonds can offer diversification, but not risk-free'. He announced that SEBI would roll out bond-focused investor awareness campaigns across India to make bond vocabulary investor-friendly, ranging from coupon, yield, duration, rating and different types of risks. Speaking at the CareEdge Debt Summit, Pandey acknowledged that corporate bonds remain poorly understood among retail households despite rising flows into equities and mutual funds, with retail participation remaining below 1% and awareness of corporate bonds standing at only 10%. The regulator noted that household penetration remains below 1%, as per a SEBI survey. NSE's debt platform has shown remarkable retail engagement, with individual investors now accounting for 77% of total trade counts, and unique retail participants rising to 12.7 lakh as of April 2026. NSE MD and CEO Ashishkumar Chauhan credited reforms such as SEBI's Online Bond Platform Provider (OBPP) framework and the reduction in minimum bond face value to ₹10,000 for improving retail access to debt markets. CareEdge Ratings recommends to encourage a wider investor base in the Indian debt capital market, there is a need to build greater awareness, relax investment mandates for retirement funds and insurance companies, and encourage higher foreign participation.
SEBI is studying mechanisms through which corporate bonds can be fractionally owned through tokenisation structures, with the underlying bond continuing to be held through a custodian or SPV structure while investors hold digital tokens representing beneficial ownership of the instrument. The regulator is evaluating whether blockchain infrastructure can improve secondary market liquidity and price discovery in corporate bonds, long considered structural weaknesses in India's debt markets. A key idea under evaluation is reducing the effective entry barrier for bond investing. Currently, several debt instruments carry face values ranging from ₹1,000 to ₹10,000 or higher, limiting broader retail participation. Tokenisation could potentially reduce investment entry points to as low as ₹100 or even ₹1 in certain structures, sources said. Discussions are understood to include token-based fractional ownership models, blockchain-enabled settlement systems, smart contract-based automated coupon payouts, real-time or near real-time settlements and integration with online distribution platforms. SEBI Chairman Tuhin Kanta Pandey emphasized that 'Once you do that, there will be a greater possibility of more liquidity and instantaneous autonomous settlements', noting that DLT is already being used in areas such as depositories and covenant monitoring and that the initiative would take time, with various stages likely to unfold over the next six to nine months.
SEBI is now working with the RBI, Ministry of Finance and market participants on a broader market-making framework aimed at improving liquidity and deepening participation in corporate debt markets. As reported by The Hindu BusinessLine, the market regulator is working with market participants, the Reserve Bank of India and the Finance Ministry to operationalise the market-making framework announced in the Union Budget. The push comes as SEBI believes India's bond market, despite growing sharply in size, remains structurally weak in several areas. Pandey pointed out that secondary market liquidity is still shallow, most bonds are held till maturity instead of actively traded, retail participation remains below 1%, and nearly 85-90% of issuances are concentrated among top-rated AA and AAA issuers. The regulator is also pushing ahead with development of bond ETFs and derivatives linked to corporate bond indices, which could help improve secondary market trading and provide institutions with tools to hedge interest-rate risk. According to The Economic Times, SEBI is working on developing exchange-traded funds linked to bonds to improve retail participation and accessibility in fixed-income products. According to The Hindu BusinessLine, corporate bond index derivatives could be launched after the Reserve Bank of India approves draft guidelines issued earlier this year. According to The Times of India, stock exchanges are ready to launch the corporate bond repo platform immediately after the Reserve Bank of India issues final guidelines. According to Zee News, improving secondary market liquidity through market-making mechanisms, bond derivatives and bond ETFs remains a key priority for market development. CareEdge Ratings recommends targeted policy steps such as relaxing investment mandates for retirement and insurance funds, rationalising the tax structure on debt products, encouraging foreign participation, improving secondary-market liquidity, etc., noting that there is scale in the corporate debt market, Pandey said, stressing that the size alone is not enough and there needs to be diversity, liquidity, and wider participation.
