India Tests Tokenized Bonds Worth $620 Billion

India has launched a pilot program for tokenized corporate bonds. The initiative covers a market valued at 620 billion dollars. Regulators use the central bank digital currency for settlement. This marks a first for the country's financial infrastructure.

The Securities and Exchange Board of India and the Reserve Bank of India started the project. It is known as Demat 2.0. The system uses distributed ledger technology. It aims to speed up bond settlement and reduce transaction risk.

Digital Rupee Enables Simultaneous Settlement

The pilot links bonds to the wholesale digital rupee. It uses a unified market interface. This allows atomic delivery versus payment. The bond and payment change hands at the same time. This reduces the risk of failed transactions.

India is the first country to combine these elements. It uses natively issued distributed-ledger bonds. It relies on statutory depository ownership records. It settles via central bank digital currency. All of this happens within existing regulated market infrastructure.

Initial Pilot Raises 116 Million Dollars

Three companies joined the first phase of the test. State-owned power lender REC issued 500 crore rupees. Engineering firm Larsen & Toubro also issued 500 crore rupees. Finance company IIFL raised 25 crore rupees. The total amount raised is 116 million dollars.

According to GN auto markets/bonds: bond trading, the bonds retain normal terms. They keep standard coupon rates. Maturity terms remain unchanged. Investor rights are preserved. The system connects with existing financial networks like NSDL and CDSL.

Investors Access Bonds Through Existing Accounts

Investors do not need new accounts for these bonds. They can hold tokens in existing Demat accounts. They must enable Demat 2.0 through their depository. Participants also need a wholesale CBDC wallet. This wallet must be held with a participating bank.

Regulators plan to expand the pilot beyond initial issuance. They will test secondary trading on request-for-quote platforms. Later stages may include access for retail investors. The current test provides a real-world check on scalability. It tests whether tokenized bonds and digital rupee settlement work at scale.