India has begun testing the Demat 2.0 system for issuing tokenized corporate bonds with settlements in digital rupee. The pilot project was introduced on September 10 by the Securities and Exchange Board of India (SEBI) in collaboration with the country's Reserve Bank (RBI) at the Global Fintech Fest in Mumbai. The initiative involves depositories NSDL and CDSL, exchanges NSE and BSE, HDFC Bank and ICICI Bank, as well as the National Payments Corporation of India. By the time of the official launch, three companies had issued bonds worth 10.25 billion rupees, or about $107 million, through the new infrastructure. REC and Larsen & Toubro raised 5 billion rupees each, while IIFL received another 250 million rupees.
The foundation of Demat 2.0 is a combination of a distributed ledger, which records bond rights, with the wholesale digital rupee of RBI. The Unified Market Interface, which integrates the securities market infrastructure and the payment system, is used for transactions. This approach allows for the synchronization of asset transfer and payment, reducing settlement risk. The economic conditions of the bonds remain unchanged: the yield rate, maturity date, and holder rights are preserved. In the future, the system is planned to be supplemented with automated payments. Smart contracts could be used for interest payments and debt redemption in central bank digital currency, which should reduce the number of manual operations in servicing issuances.
The first company to issue such securities as part of the testing was the state-owned REC. On September 7, it issued tokenized bonds with a rate of 7.3% and raised 5 billion rupees, while the volume of applications reached 7.96 billion rupees. Currently, Demat 2.0 is only available to institutional investors. Participation requires a digital rupee wallet and access to the relevant infrastructure. In the future, regulators plan to open up the possibility of secondary trading and provide access to retail investors, but at this stage, the project remains a limited experiment.