The Securities and Exchange Board of India (SEBI) has officially launched Demat 2.0, a pilot project to test tokenisation of corporate bonds using distributed ledger technology (DLT). The initiative was announced jointly by RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey at the Global Fintech Fest in Mumbai, according to a press release issued by SEBI on Thursday along with comprehensive FAQs detailing how the pilot will work. As per The Economic Times, Demat 2.0 is a pilot for the next generation of financial market infrastructure that allows corporate bonds to be issued, held, traded and settled in tokenised form using DLT. The technology changes the method of recording ownership and transferring securities, but the investment itself remains the same conventional dematerialised bond with the same ISIN, coupon, maturity, covenants, rating, security, and investor rights.
SEBI has launched a pilot program for tokenised corporate bonds worth ₹1,025 crore across three major issuers, with the latest data showing three successful issuances completed. The pilot includes REC Limited (₹500 crore), L&T Limited (₹500 crore) and IIFL (₹25 crore). REC was the first to issue on 7 September 2026 and raised ₹500 crore from 18 investors, while L&T issued on 9 September and raised ₹500 crore from four investors. IIFL issued on 9 September and raised ₹25 crore from one investor. The initial phase is restricted to institutional investors, with retail investors expected to be included in later phases. The project brings together tokenised securities, digital settlement assets through the central bank digital currency (CBDC) and smart contracts while building on existing market infrastructure.
Demat 2.0 uses an atomic settlement mechanism where the transfer of securities and payment occur simultaneously, enabling instant settlement of tokenised bonds. As per The Economic Times, Demat 2.0 is connected to the RBI's wholesale central bank digital currency (CBDC), or e-rupee, through the Unified Market Interface. The system consists of two wallets - a securities wallet containing bond tokens and a currency wallet containing digital rupee (CBDC). The process allows investors to receive tokenised bonds instantly against payments made through CBDC, significantly reducing the time gap in securities settlement. Investors can receive funds immediately in secondary-market transactions under Demat 2.0, compared with the earlier two-to-three-day timeline. This contrasts with the conventional system where there is a time gap between payment and receipt of securities, with investors having to wait one day for bond delivery.
Under the new system, bondholder details are visible to authorised institutions on the shared ledger, enabling automated processing of interest and redemption payments. As per The Economic Times, smart contracts — instructions written into the ledger that execute automatically — can trigger interest and redemption payments. Currently, the issuer or its registrar needs to obtain the list of bondholders from the depositories, calculate the amount payable to each holder and route the payments separately through the banking channel. Under Demat 2.0, payments in e-rupee can reach bondholders' CBDC wallets on the due date. This means interest and redemption payments can be processed automatically through the new infrastructure, eliminating the need for manual calculations and separate banking channels.
The Securities and Exchange Board of India (SEBI) is advancing the use of emerging technologies in securities markets by implementing the International Organization of Securities Commissions' (IOSCO) supervisory toolkit for AI in the Indian securities market. According to reports from The Financial Express, chairman Tuhin Kanta Pandey announced these plans at the Global Fintech Fest 2026, stating the initiative aims to strengthen risk management and develop an agile AI governance framework. The regulator had earlier indicated that the IOSCO toolkit would be integrated into its AI strategy for regulated entities. As per ANI, SEBI Executive Director Manoj Kumar confirmed that AI is already supporting SEBI's functioning and AI adoption is increasingly visible across the financial ecosystem.
The pilot will roll out in three stages: first, tokenised corporate bond issuance with institutional participation; second, secondary-market trading with retail investors; and third, expansion to other regulated entities and financial instruments. Retail investors are not currently covered in the initial phase, but SEBI plans to extend access to retail investors in a later phase. Demat 2.0 is currently in pilot mode and secondary-market trading in the tokenised bonds is not yet available, as noted by NSDL's Chandok. He emphasized that "It requires acceptance, requires maturity and it requires regulation" for wider trading capabilities. The existing Demat system will continue to operate alongside Demat 2.0, which brings the additional capability of simultaneous settlement. Looking ahead, SEBI aims to leverage technology to enable seamless distribution of all financial products throughout the country, with the regulator focusing on scenarios where technology can support financial inclusion efforts.
