India launches pilot for tokenized bonds with digital rupee settlement

India's central bank and markets regulator have launched a pilot program to tokenize corporate bonds and settle them using a wholesale central bank digital currency, a move aimed at speeding up transactions and automating bond servicing. The Reserve Bank of India and the Securities and Exchange Board of India announced the "Demat 2.0" pilot on September 10 at the Global Fintech Fest in Mumbai. The system uses distributed ledger technology for the securities ledger and the RBI's wholesale digital rupee for settlement, enabling what regulators call "atomic settlement" where the bond and payment move simultaneously. This contrasts with conventional processes where settlement can take two to three days. SEBI Chairman Tuhin Kanta Pandey emphasized that the pilot does not create a new asset class or require investors to open new demat accounts or complete fresh KYC checks. Three initial bond issuances have already been completed under the pilot. State-owned REC Ltd raised 500 crore on September 7, with investors submitting bids totaling 796 crore. Larsen Toubro followed on September 9 with a 500 crore issue purchased by four investors.