India’s corporate bond market has entered a new phase of technological modernization following the joint launch of the ‘Demat 2.0’ pilot by the Reserve Bank of India and the Securities and Exchange Board of India. Announced by RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey at the Global Fintech Fest 2026 in Mumbai, the initiative introduces a distributed ledger technology framework where corporate bonds are issued and recorded as digital tokens. The overhaul is designed to automate processes, lower transaction expenses, and curb settlement risks without altering the established legal nature, rights, or repayment obligations governing corporate bonds.
Atomic Settlement Linked to Wholesale E-Rupee
Under the new system, corporate bonds are maintained as digital tokens on a shared electronic ledger operated by depositories and market infrastructure institutions. The framework connects directly to the RBI’s wholesale central bank digital currency, known as the wholesale e-rupee, through the Unified Market Interface. This architecture facilitates atomic settlement, executing the transfer of bonds and corresponding payment transfers at the exact same moment. In contrast to the existing process where the two legs of a transaction often conclude at different times, the pilot substantially narrows operational delays and eliminates settlement exposure. Smart contracts will also be deployed to automate interest and principal disbursements, crediting funds straight to investors’ wholesale e-rupee accounts on scheduled payment dates.
Same-Day Capital Access for Corporate Issuers
The transition to tokenized securities delivers measurable time savings for bond issuers. While conventional bidding and fund allocation routes typically take two to three days to deliver capital to issuers, Demat 2.0 targets same-day fund availability, with secondary market sellers also positioned to receive proceeds instantaneously. Market intermediaries stand to gain from reduced administrative friction, as unified ledger records minimize manual document sharing, reconciliation tasks, and data verification steps. Market operations under the pilot have already seen initial capital mobilization, with three entities raising a collective ₹1,025 crore. REC conducted the country’s first regulatory sandbox tokenized issuance by raising ₹500 crore from 18 investors on September 7. On September 9, Larsen & Toubro raised ₹500 crore from four investors, while IIFL secured ₹25 crore from a single participant.
Phased Expansion and Regulatory Guardrails
Regulators have clarified that Demat 2.0 is purely an infrastructure upgrade rather than a cryptocurrency initiative, preserving all standard statutory checks such as credit ratings, debenture trustees, listing mandates, and disclosure norms. Retail investors cannot participate during this initial run, which requires institutional participants to activate the Demat 2.0 service on existing demat accounts and hold a wholesale e-rupee account with an authorized bank. Future iterations will link the system with request-for-quote bidding channels before broadening access to retail participants, with long-term implementation guided by the operational findings gathered during the current trial.
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