India’s securities regulator and central bank have launched a pilot that issues corporate bonds on a distributed ledger and settles them instantly with the wholesale digital rupee. Three issuers — REC Limited, Larsen & Toubro, and IIFL Finance — raised a combined ₹1,025 crore in the first phase of the Demat 2.0 project.
The pilot, unveiled on September 10, 2026, does not create a new asset class. It replaces the plumbing underneath existing bonds, cutting settlement from days to the same day. Secondary trading and retail access are planned but not yet scheduled.
REC Limited offered a base issue of ₹100 crore with a ₹400 crore greenshoe option. Investors bid for ₹796 crore, and the company accepted the full ₹500 crore. The oversubscription, on a 7.30% coupon maturing in May 2028, is the first hard number from India’s experiment with tokenised corporate debt — and it quietly reframes what the pilot is testing.
The Securities and Exchange Board of India and the Reserve Bank of India are not asking whether distributed ledgers can issue a bond. They are asking whether the market’s existing infrastructure — its depositories, its electronic bidding platforms, its demat accounts — can absorb one without breaking. The answer, for three deals across two days in early September, was yes.
The number that changes the settlement clock
The three transactions moved at a speed the old system could not match. REC raised its ₹500 crore from 18 investors on September 7. Larsen & Toubro followed on September 9 with a ₹500 crore bond. According to reports, the bond carried a 7.40% coupon and a three-year maturity. IIFL Finance issued ₹25 crore to a single investor the same day; according to issuer disclosures, at 9.10% for two years. In each case, the bond and the payment moved together — an atomic settlement that put the cash in the issuer’s account on the bidding day, not two or three days later.
The mechanism is the Unified Market Interface, the RBI’s bridge between the depository-run distributed ledger and wholesale digital rupee wallets. When a bid succeeds, the UMI triggers the simultaneous transfer of the tokenised security and the central bank digital currency. There is no gap where one leg completes and the other fails. For an issuer, that eliminates a settlement-risk window that previously stretched across a weekend if a deal closed on a Thursday.
The architecture is easier seen than read.
SEBI Chairman Tuhin Kanta Pandey was blunt about what Demat 2.0 is not. “There is no parallel market. There is no liquidity divide. Asset is same,” he said at the Global Fintech Fest in Mumbai, where he and RBI Governor Sanjay Malhotra presented the pilot jointly. The bonds carry the same credit ratings, the same debenture trustees, the same listing rules. The only thing that changed is the record-keeping layer underneath.
That layer is a permissioned distributed ledger maintained by India’s two statutory depositories, NSDL and CDSL. Investors keep their existing demat accounts. They do not open new securities wallets or undergo fresh identity checks. But they must activate Demat 2.0 access with their depository and hold a wholesale digital rupee wallet at a participating bank. The 23 investors across the three deals — assuming no overlap, which SEBI has not confirmed — cleared that bar.
The table below maps what the pilot changes against what it leaves alone.
| Entity | Current rule | New rule under Demat 2.0 | Effective date |
|---|---|---|---|
| Ownership record | Centralised depository database | Distributed ledger shared by NSDL and CDSL | September 7, 2026 |
| Settlement | Separate security and cash legs; T+2 or T+3 | Atomic delivery-versus-payment via UMI and wholesale e₹ | September 7, 2026 |
| Investor account | Existing demat account | Same demat account, with Demat 2.0 activation | September 7, 2026 |
| Payment rail | Commercial bank channels | Wholesale digital rupee wallet at a participating bank | September 7, 2026 |
| Credit rating, listing, disclosure | SEBI regulations apply | Unchanged | Ongoing |
| Retail participation | Permitted through existing platforms | Not yet eligible; planned for later phase | To be announced |
| Source: SEBI Press Release PR No. 56/2026, September 10, 2026 | |||
RBI Executive Director P. Vasudevan put a precedent behind the infrastructure. The Unified Market Interface has already processed “about 248 certificate-of-deposit transactions worth ₹17,000 crore,” he said, with roughly two-thirds in the secondary market. Corporate bonds are a larger, more complex asset class — India’s market stood at ₹53.64 lakh crore in September 2025, according to the National Institute of Securities Markets — but the plumbing has been tested.
The infrastructure bet that skips the crypto markets
India’s approach is a deliberate contrast to tokenisation projects that use privately issued stablecoins or standalone platforms. Switzerland’s SDX settles tokenised bonds with central bank money on a regulated digital exchange. Demat 2.0 goes further into the existing stack: the bonds sit in the same demat accounts investors already use, the ledger is run by the same depositories, and the cash leg is the central bank’s own digital rupee.
That integration is the point. SEBI and the RBI are not building a parallel market. They are rewiring the one they already regulate. The EU’s DLT pilot regime creates separate licences for tokenised trading venues. The US relies on case-by-case SEC and CFTC oversight. India’s model keeps the regulator, the depository, and the central bank inside the same architecture, with no new licensing category for the token itself.
The risk is concentration. A system that routes every tokenised bond through two depositories and a single central bank interface is efficient. It is also a narrow set of gateways. If secondary trading takes off, the same institutions that record ownership will control the ledgers that settle the trades. SEBI has not addressed how it will manage competition or access if the pilot scales.
The next signal is a SEBI circular on secondary trading. If it arrives with specific RFQ connectivity rules and participant criteria in the months following the Global Fintech Fest, the pilot shifts from a controlled issuance test to something that affects pricing and liquidity. If it is delayed or vague, Demat 2.0 remains an infrastructure experiment — significant in architecture, but limited in what it changes for the market.
Beyond the headline
The bigger picture
Demat 2.0 is an attempt to fold programmable settlement and shared ledgers into India’s mainstream capital-market plumbing without disturbing the existing hierarchy of regulators, depositories and banks. That approach reflects a broader pattern in India’s financial innovation: using new rails like CBDC and DLT to reinforce, rather than bypass, incumbent market infrastructure.
The reach
For global asset managers that already treat India as a core allocation in emerging-market debt portfolios, the critical implication is operational rather than directional: future rupee corporate bonds may settle faster and carry different custody and wallet requirements. This could affect how Western firms structure mandates, choose local intermediaries and evaluate operational risk when accessing Indian credit over the next few years.
What isn’t being said
Official messaging focuses heavily on settlement efficiency and regulatory continuity but is quieter about potential concentration of operational control among a small number of depositories, banks and infrastructure providers. Including that dimension changes the picture: the same architecture that reduces settlement risk could also make market access more dependent on a narrow set of licensed gateways, with implications for competition and innovation.
The decisions that follow a pilot
With the first three deals completed and secondary trading still unscheduled, the pilot has opened a window for preparation rather than immediate action. Four groups face distinct choices.
- Western institutional investor in Indian corporate debt
Evaluate whether your existing custody and settlement arrangements can accommodate a wholesale digital rupee wallet and Demat 2.0 activation. Review SEBI’s pilot FAQs and press release PR No. 56/2026 on the regulator’s website for current eligibility criteria. Future Indian corporate bond mandates may require local intermediaries with UMI connectivity — start mapping which of your counterparties have it.
- Global fintech firm with DLT or CBDC solutions
Analyse the Demat 2.0 architecture for middleware opportunities. The depositories will need tools that connect global custody systems to the UMI, and compliance workflows that map activation requirements onto existing onboarding. India’s regulator-led model — statutory depositories plus central bank money — is a template that other jurisdictions are watching; firms that build for it now may have a head start when similar frameworks emerge elsewhere.
- Western financial regulator or central banker
Study the regulatory framework in SEBI’s PR No. 56/2026 and the RBI’s wholesale CBDC pilot reports. India’s approach — treating tokenisation as infrastructure rather than a new asset class, and keeping existing demat accounts and KYC intact — offers a case study in integrating DLT without creating a parallel licensing regime. The UMI’s prior processing of 248 certificate-of-deposit transactions worth ₹17,000 crore provides a quantified baseline for settlement-risk reduction claims.
- Western asset manager with APAC emerging market exposure
Monitor SEBI’s forthcoming circular on secondary trading. If it specifies RFQ connectivity and participant criteria, tokenised bonds could begin to affect pricing and liquidity in Indian corporate debt — a segment that stood at ₹53.64 lakh crore in September 2025. Adjust operational due diligence for Indian fixed-income assets to include Demat 2.0 activation status and wholesale e₹ wallet availability at your local custodians.
FAQ
What do institutional investors need to do to participate in Demat 2.0?
Institutional investors must continue using their existing demat accounts but need to explicitly enable Demat 2.0 access with NSDL or CDSL and obtain a wholesale digital rupee wallet from a participating bank. These wallets are distinct from retail CBDC pilots and are tied to the Unified Markets Interface, making onboarding dependent on both depository and banking relationships.
What operational steps do issuers follow under the pilot?
Issuers use the standard electronic bond bidding platforms — such as NSE’s EBP — to conduct book-building, then coordinate with depositories and their banking partners to map successful bids into tokenised holdings on Demat 2.0 and arrange wholesale e₹ settlement. The process preserves familiar regulatory filings and listing steps while adding a DLT-based recording stage and CBDC pay-in mechanics.
How does the Unified Markets Interface work with wholesale CBDC?
RBI’s Unified Markets Interface pairs tokenised financial assets with wholesale CBDC settlement. In prior certificate-of-deposit pilots, about 248 transactions worth ₹17,000 crore were processed, two-thirds in secondary markets, demonstrating how the platform handles issuance and trading before Demat 2.0 extended the concept to corporate bonds.
Explainer
- Atomic settlement
- A transaction where the transfer of a security and its payment occur simultaneously, with no interval where one leg completes without the other. In Demat 2.0, the RBI’s Unified Market Interface links the depository ledger to wholesale digital rupee wallets to execute this in central bank money. The mechanism eliminates the two-to-three-day settlement gap that previously exposed issuers and investors to counterparty risk between bidding and payment.
- Unified Market Interface
- The Reserve Bank of India’s platform that connects tokenised financial assets to the wholesale digital rupee for settlement. It was first tested with certificates of deposit, processing about 248 transactions worth ₹17,000 crore before being extended to corporate bonds under Demat 2.0. The UMI is the technical bridge that makes atomic delivery-versus-payment possible within India’s regulated market infrastructure.
- Wholesale digital rupee
- The Reserve Bank of India’s central bank digital currency issued for institutional use, distinct from the retail digital rupee pilot. Launched in November 2022 for secondary-market government securities settlement, it now serves as the cash leg for tokenised corporate bonds under Demat 2.0. Participating banks issue wholesale e₹ wallets that investors must hold to settle bond transactions.
- Demat account
- An electronic account held with an Indian depository — NSDL or CDSL — that records ownership of securities in dematerialised form. Under Demat 2.0, investors keep the same demat accounts but must activate tokenised bond access; the underlying record-keeping shifts to a distributed ledger shared by the two depositories while the account structure remains unchanged.
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