The Securities and Exchange Board of India (SEBI) has launched “Demat 2.0”, a pilot project to test the of corporate bonds using distributed ledger technology (DLT).
The initiative was announced jointly by Governor Sanjay Malhotra and Chairman Tuhin Kanta Pandey at the Global Fintech Fest in Mumbai, according to a press release issued by SEBI on Thursday along with FAQs detailing how the pilot will work.
Here’s what investors need to know.
What is Demat 2.0 and how will it work?
Demat 2.0 is a pilot for the next generation of financial market infrastructure that allows corporate bonds to be issued, held, traded and settled in tokenised form using Distributed Ledger Technology.
According to the release, “The pilot does not change the legal character, rights, obligations or regulatory treatment of the corporate bond. What changes is only the technology.”
In simple terms, the corporate bond itself is issued as a digital token on a private, permissioned DLT network operated by the depositories. The technology changes, but the investment does not become a new type of security.
The bond retains the same ISIN, coupon, maturity, covenants, rating, security, and investor rights as a conventional dematerialised bond. What changes is the technology used to record ownership, transfer securities, and settle funds.
Do investors need a new demat account?
No.
“The Demat 2.0 account is an extension of the investor’s existing demat account and is not a separate demat account. The investor’s existing KYC is used,” according to the release.
Investors need two things: a Demat 2.0 account linked to their existing demat account and a CBDC (e ₹) wallet with their bank. No separate technology setup or investment is required.
Will tokenised bonds trade on a new exchange?
No. There will be no separate tokenised exchange under the pilot.
“The pilot does not propose a separate trading venue or segregated market segment,” as stated in the release.
How will the tokenised bond be issued?
The issuer will use the existing stock exchange Electronic Bidding Platform (EBP) to issue the bond. The bond will get an ISIN from the depository, which will be marked as a tokenised or pilot ISIN.
The bidding and allotment process will remain unchanged. Once the bond is allotted, the depository will credit it directly to the investor’s Demat 2.0 account.
What are the key benefits of Demat 2.0?
The biggest change is expected to be the speed of settlement.
At issuance, the issuer can receive funds on the same day as bidding, compared with the 2–3 days generally required earlier. In secondary-market transactions, investors can also receive funds immediately rather than waiting 2–3 days.
“Interest and redemption payments are credited in e ₹ to the bondholders’ CBDC wallets on the due date, triggered automatically by smart contract,” according to the release.
How much has been issued so far?
“The pilot is being taken forward in phases. Issuances under the first phase are ongoing,” as stated. The pilot has so far seen three tokenised bond issuances worth ₹1,025 crore:
- REC was the first to issue on 7 September 2026 and raised ₹500 crore from 18 investors.
- L&T issued on 9 September and raised ₹500 crore from four investors.
- IIFL issued on 9 September and raised ₹25 crore from one investor.
The pilot will roll out in three stages: first, tokenised corporate bond issuance with institutional participation; second, secondary-market trading with retail investors; and third, expansion to other regulated entities and financial instruments.
Can retail investors participate?
Not yet. Retail investors are not currently covered in the initial phase. SEBI plans to extend access to retail investors in a later phase.
Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.