Demat 2.0 is a Securities and Exchange Board of India pilot that issues corporate bonds as digital tokens on a distributed ledger owned by India’s depositories, and settles the money side in the Reserve Bank’s wholesale digital rupee, so the bond and the cash change hands in a single transaction. It was announced by RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey at the Global Fintech Fest in Mumbai on 10 September 2026. Three issuers — REC, L&T and IIFL — had already raised ₹1,025 crore through it. The bonds remain ordinary corporate bonds in law, carrying the same ISIN, coupon, maturity, credit rating, debenture trustee and investor rights as before. Only the technology that records ownership and moves the money has changed.
What makes this a first is the combination, not the blockchain. Tokenised bonds already exist — Switzerland’s Project Helvetia III, Hong Kong’s Project Evergreen, issues from BlackRock, JP Morgan and the AIIB — but those were run by individual issuers on separate platforms. SEBI states that India is the first country where corporate bonds have been issued natively on a distributed ledger, with the ownership record held by the country’s statutory depositories and the funds leg settled in central bank digital currency, all inside existing regulated market infrastructure. For ordinary investors, nothing is live yet: the first stage is institutional and issuance-only, with secondary trading and retail access planned for a later phase.
Table of Contents
The three issuances so far
| Issuer | Date | Amount raised | Investors |
|---|---|---|---|
| REC Limited (public sector NBFC) | 7 September 2026 | ₹500 crore | 18 |
| L&T Limited | 9 September 2026 | ₹500 crore | 4 |
| IIFL (private NBFC) | 9 September 2026 | ₹25 crore | 1 |
| Total | — | ₹1,025 crore | 23 |
How the plumbing actually works
Issuance runs through the same Electronic Bidding Platform that stock exchanges already operate. The ISIN comes from the depositories in the usual way, flagged as a pilot or tokenised ISIN. Bidding, modification, cancellation and allotment timelines are unchanged. On allotment, the depository credits the tokens directly to the allottees’ Demat 2.0 accounts, which are extensions of their existing demat accounts rather than new ones.
The bond’s terms — coupon rate, payment dates, day-count convention, redemption terms — are written into a smart contract attached to the token. The ledger connects to the RBI’s Unified Markets Interface, which carries the wholesale e₹. That link produces atomic delivery-versus-payment: if the securities transfer succeeds, the payment succeeds, and if either leg fails, neither settles. The infrastructure is being built and run by the market infrastructure institutions with implementation support from NPCI, with nodes initially operated by the depositories and stock exchanges.
SEBI’s claimed gains follow from that design. Issuers receive funds on the same day as bidding instead of two to three days later. Investors selling in the secondary market would get funds immediately rather than after the usual cycle. Coupon and redemption payments reach bondholders’ CBDC wallets on the due date, triggered by the smart contract, instead of the issuer or its registrar pulling a holder list, computing what each is owed and routing payments separately through banking channels. Settlement risk between the two legs disappears because there is no longer a gap between them.
Blockchain, built to look nothing like crypto
The ledger is private and permissioned, and the depositories own it. More pointedly, the depositories hold and manage the private keys on behalf of investors, so no one has to handle cryptographic material or buy specialised hardware. The depository, not the ledger, remains the authoritative record of beneficial ownership under the Depositories Act, 1996 — the ledger is described as the form that record takes, not a replacement for it. A freeze, attachment or court direction on a demat account applies to the linked token holding exactly as before.
There is also no new venue. SEBI has explicitly ruled out a separate tokenised exchange or a segregated market segment, and says existing request-for-quote and OTC reporting platforms will link to the DLT infrastructure so the market is not fragmented into tokenised and non-tokenised pools.
Read together, those choices amount to a position. India has adopted distributed ledger technology as state-owned market plumbing while keeping the features usually claimed for blockchains — self-custody, permissionless verification, a trustless record — deliberately switched off. That is consistent with how the state has treated private crypto, which continues to sit outside the banking system under a flat 30% tax on gains with no loss offset and a 1% tax deducted at source.
From UPI to UMI: the digital public infrastructure lineage
Demat 2.0 is the visible end of groundwork the RBI has been laying for a year. The central bank unveiled the Unified Markets Interface at Global Fintech Fest 2025 as a platform for tokenising financial assets settled in wholesale CBDC. Its annual report for 2025-26 describes UMI as a multi-layer platform and records a pilot for tokenised certificates of deposit run on it.
The same report shows the digital rupee being pushed into other government use cases: programmable CBDC delivered food subsidies to public distribution system beneficiaries in Gujarat, Puducherry and Chandigarh, redeemable only for eligible goods at fair price shops. The RBI has joined Project Rialto and the second phase of Project Mandala, both run by the Bank for International Settlements Innovation Hub, and said it would explore bilateral and multilateral cross-border CBDC pilots in 2026-27.
Demat 2.0 is the first time that stack has been pointed at a market this size. India’s outstanding corporate bond market is roughly ₹53–58 lakh crore, about $620 billion, having grown at around 12% compound annually.
What comes next, in three stages
- Stage I (running now): tokenised issuance through EBP integration, with asset servicing on the ledger. Participation is institutional.
- Stage II: secondary-market trading through existing RFQ and OTC platforms, with access extended to retail investors. Until it opens, holders are not locked in — the pilot provides an interim peer-to-peer, demat-to-demat transfer on request through the depositories, with the payment leg settled outside the atomic architecture.
- Stage III: nodes potentially extended to credit rating agencies, depository participants and other regulated entities, with other instruments and a wider range of corporate actions under consideration.
Beyond the pilot itself, officials have indicated the framework could later cover equities, mutual fund units and electronic gold receipts. None of that is committed. The whole exercise sits inside SEBI’s Regulatory Sandbox, where any relaxation is granted for a defined scope and period, and a broader framework depends on how the pilot performs.
What is still unresolved
The scale is tiny, and the problem may be the wrong one. ₹1,025 crore against a $620 billion market is a rounding error. More importantly, India’s corporate bond market does not primarily suffer from slow settlement. It suffers from thin trading. Average daily secondary-market turnover was ₹7,645 crore in 2024-25 according to the RBI’s annual report, and private placements accounted for 99.2% of issuance. Bonds placed privately with a handful of institutions and held to maturity do not begin trading because the ledger underneath them changed.
The issuer base is narrow. Analysis cited in early 2026 put the number of listed companies that have ever raised money through bonds at around 770 out of more than 5,600, with only 272 issuing more than once. Faster settlement does not widen that base; credit depth and market making do.
CBDC has not been tested at market volume. The wholesale e₹ leg is what makes atomic settlement possible, and the digital rupee remains a pilot instrument with modest circulation. What happens when the funds leg has to carry routine bond-market volume is unproven.
Smart contract enforceability has no Indian case law. SEBI says the bond’s terms are encoded and execute automatically. No Indian court has yet ruled on what happens when encoded terms and the offer document diverge, or who bears the loss when a contract executes correctly on incorrect inputs.
Market participants are positive but hedged. Mudrex’s Prateek Gupta has said the pilot remains too small to call a market transformation, pointing to secondary liquidity and broader participation as the things that will decide its significance. BondScanner’s Nishchay Nath praised the conservative structuring but described the pilot as “issuance-led and institutional today”.
What to do about it
If you invest in bonds: there is nothing to do yet. When Stage II opens, you will need two things and neither is onerous — ask your depository to enable Demat 2.0 on your existing demat account, and open a wholesale CBDC wallet with a participating bank. There is no separate demat account, no fresh KYC, and no technology to buy. Holdings stay visible through your depository’s existing interface and holding statement.
If you are an issuer: you do not need a Demat 2.0 account at all. You need a CBDC wallet linked to your designated bank account to receive issue proceeds and make coupon and redemption payments. The funds leg settles in e₹, not through RTGS.
If you follow India’s digital infrastructure: the number that matters is not ₹1,025 crore. It is whatever secondary-market turnover looks like once Stage II is live, and whether any issuer outside the top credit tier uses the system. Demat 2.0 has solved a problem India’s bond market has only mildly — the two-to-three day settlement lag — and left the problem it has badly, which is that almost nobody trades these bonds, to a stage that has not started. Whether this becomes infrastructure or stays a demonstration is decided there, not here.
Updates
- 2026-09-12 — First published. Covers SEBI Press Release 56/2026 and its 24-question FAQ, the three Stage I issuances totalling ₹1,025 crore, and the RBI’s UMI and wholesale CBDC groundwork.
