India’s capital markets regulator is exploring a pilot to tokenize corporate bonds as it seeks to deepen India’s debt markets, Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India (Sebi) said on Tuesday.
“The pilot will test whether tokenization can deliver faster settlement, better traceability, automated servicing and greater transparency. Once you do that, there will be a greater possibility of more liquidity,” Pandey said at the Care Edge Debt Market Summit 2026 held in Mumbai.
What is bond tokenisation and how does it change traditional bond investing?
is the process of converting a traditional bond into digital tokens using a blockchain framework. Each token represents ownership of a portion of the bond, giving investors exposure to the same underlying returns, such as interest payments and principal repayment at much smaller ticket sizes.
Unlike traditional bonds, which pass through layers of intermediaries for issuance, settlement and custody, tokenised bonds can be issued, traded, and settled digitally with fewer intermediaries and with a complete transaction record that anyone with access can verify in real time, according to two experts who spoke to Mint.
“For retail investors, the more significant change is accessibility. Corporate bonds have historically been an institutional product. Tokenisation allows fractional ownership, meaning an investor does not need to commit large sums to gain exposure to fixed income. That opens a market that has largely been out of reach for everyday investors,” said Nikhil Aggarwal, Founder and Group CEO at Grip Invest.
What are the key risks and concerns around tokenised bonds?
The biggest risks around bond tokenisation are not the technology itself, but the infrastructure built on top of it. SEBI has already flagged concerns that future quantum machines could break the cryptographic algorithms securing the blockchain, compromising the entire system of record, Aggarwal said. At the same time, operational interoperability between legacy depository systems and new blockchain infrastructure remains untested at scale, he added.
Regulatory clarity is another major gap. India still lacks a comprehensive legal framework defining ownership rights, dispute resolution, and investor protection for tokenised bonds, said Prateek Gupta, Head of Business at Mudrex. “Until that framework is complete, institutional participation will remain subdued,” he added.
Liquidity may also remain a challenge initially, as tokenised will only be effective if participation scales meaningfully. “In the early stages of a pilot, secondary market depth will be limited. Investors need to understand that getting in is easier than getting out. None of these risks makes tokenisation a bad idea. They make the pilot, a right approach,” Gupta said.
What are the benefits of investing in tokenised bonds? Key features explained
The most immediate benefit is settlement speed as corporate bonds currently settle on a T+2 cycle, which is two days after the transaction, according to Gupta. He explained that on a blockchain, settlement can happen in real time. As a result, tokenised bonds would free up capital faster and reduce the counterparty risk that exists in the window between trade and settlement.
He also mentioned transparency as the second benefit. “Every transaction on a distributed ledger is recorded and immutable. For investors, that means complete visibility into ownership history, coupon payments, and redemption without relying on intermediaries to maintain accurate records,” he said.
Commenting on SEBI’s decision, Gupta said that a pilot to is the right starting point as it is a well-understood instrument with an existing regulatory framework. “If the pilot demonstrates efficiency gains without compromising investor protection, the case for broader adoption, including government securities and other fixed-income products, becomes very straightforward to make,” he said.