India Launches 'Demat 2.0' Pilot for Tokenized Corporate Bonds and CBDC Settlement

The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have launched a pilot project named 'Demat 2.0' to test the tokenization of corporate bonds and expedite settlement processes through blockchain technology and central bank digital currency (CBDC). This initiative was announced on September 10 at the Global Fintech Fest in Mumbai.

The pilot commenced with three issuances, including a ₹500 crore bond from Larsen & Toubro, supported by major investors such as SBI and Axis Bank. SEBI Chairman Tuhin Kanta Pandey stated that the project aims to integrate security and settlement processes more closely while automating aspects of asset servicing.

'Demat 2.0' builds on the original Demat initiative from 1996, which transitioned shareholding from paper-based records to digital formats. The new framework combines tokenized securities with digital settlement assets and smart contracts, utilizing CBDC for settlements. This model is expected to maintain legal certainty over ownership while enhancing market infrastructure.

Future applications of this framework could extend to equities, mutual funds, and gold, while tokenization of commercial papers and certificates of deposit is already in practice. RBI Executive Director P. Vasudevan noted that the central bank is also exploring gold tokenization.

Tokenization allows for the division of assets into smaller digital units, potentially lowering ownership costs and increasing accessibility for retail investors. For instance, a ₹10 lakh bond could be split into ₹100 units. This digitization can also improve ownership records and reduce settlement times.

RBI Governor Sanjay Malhotra highlighted India's potential role in shaping the future of global finance, emphasizing the importance of developing digital public infrastructure, such as the Unified Lending Interface (ULI), to facilitate consent-based credit delivery.