The Securities and Exchange Board of India (SEBI) has launched a pilot called “Demat 2.0” for corporate bonds.
The initiative was announced on September 11 during the Global Fintech Fest in Mumbai by SEBI Chairman Tuhin Kant Pandey and Reserve Bank of India (RBI) Governor Sanjay Malhotra.
Under the pilot, corporate bonds can be issued, held and settled as digital tokens using Distributed Ledger Technology (DLT).
Payments will be made through the RBI’s wholesale Central Bank Digital Currency (CBDC), the digital rupee (e₹).
Importantly, tokenisation will not change the legal identity of a corporate bond. Its ISIN, coupon rate, maturity, rating, terms and conditions, and investor rights will remain unchanged.
SEBI Demat 2.0: What Will Change?
In the existing demat system, ownership of securities is recorded in a traditional database. Under Demat 2.0, corporate bonds will be created directly as digital tokens on a private and permission-based DLT network.
DLT is a shared digital record that can be updated and managed by participating entities.
For this pilot, depositories and exchanges will operate the ledger, while NPCI will support the technology and implementation.
However, the official record of an investor’s ownership will continue to remain with the depositories.
Another important feature is the connection between securities and payment settlement. Demat 2.0 is linked with the RBI’s wholesale CBDC and Unified Market Interface to enable simultaneous delivery-versus-payment (DvP).
In simple terms, the bond will be transferred only when the payment is transferred. This can reduce the risk of one side completing a transaction while waiting for the other side to make the payment.
What Benefits Will Investors Get?
One of the major expected benefits is faster settlement. SEBI has said that under the existing process, funds can sometimes take 2-3 days to reach investors.
With Demat 2.0, securities and funds can be settled simultaneously. This could allow investors selling corporate bonds in the secondary market to receive their money immediately after settlement and potentially use it for other investments.
The system can also use smart contracts to automate certain bond-related activities. Interest payments and repayment of principal at maturity could be programmed according to predefined rules.
The amount due to an investor could then be transferred to the investor’s CBDC wallet on the scheduled date. This could reduce some of the manual processes involved in corporate bond payments.
Do Investors Need a New Demat Account?
Investors will not need to open a separate demat account for Demat 2.0 or complete a fresh KYC process. Tokenised bonds will remain linked to their existing demat accounts, and the holdings will be reflected through the depository’s existing interface and holding statement.
Investors will also not have to manage their own cryptographic private keys. The responsibility for this will remain with the depository.
However, investors participating in the pilot will need a CBDC wallet through their bank. With the investor’s consent, the existing demat account can be linked to this wallet for fund settlement.
The existing rules for corporate bonds will also continue to apply. This includes requirements related to credit ratings, debenture trustees, listing, disclosures, investment eligibility and investor protection.
[[H2: Which Companies Have Issued Tokenised Bonds?]]
Three companies have so far issued tokenised corporate bonds under the Demat 2.0 pilot, with a combined value of ₹1,025 crore.
REC issued a ₹500 crore bond on September 7, 2026. The issue had 18 investors and carried a 7.30% coupon with a maturity of around 20 months.
L&T raised another ₹500 crore on September 9. Four investors participated in the issue, which carried a 7.40% coupon and had a three-year maturity.
On the same day, IIFL issued tokenised bonds worth ₹25 crore. These bonds carried a 9.10% coupon and had a two-year maturity.
Participation in the initial phase of the pilot is currently limited to institutional investors.
When Can Retail Investors Buy Tokenised Bonds?
Retail investors cannot currently buy or sell corporate bonds through Demat 2.0. SEBI plans to expand the system gradually.
The first phase focuses on issuing tokenised bonds by connecting the system with existing electronic bidding platforms. The second phase is expected to introduce secondary-market trading.
SEBI does not plan to create a separate tokenised exchange. Instead, existing Request for Quote (RFQ) and over-the-counter (OTC) reporting platforms are expected to be integrated with the DLT system.
Retail investors are also expected to be included in this second phase. The pilot also provides for peer-to-peer or demat-to-demat transfers through depositories before secondary-market trading begins.
In a later phase, other regulated entities such as credit rating agencies and depository participants could also be integrated into the system.
Does Tokenisation Change the Bond?
Demat 2.0 does not create a new type of bond or change the rights of investors. Tokenisation mainly changes how corporate bonds are recorded, transferred and settled.
The issuer’s obligation to repay the bond remains unchanged, as do the rights of investors.
SEBI’s pilot currently focuses on corporate bonds and is being expanded gradually. The next major step is expected to be the introduction of secondary-market trading and wider participation, including retail investors