India’s First Tokenised Corporate Bond is a Measured Step Forward

India is preparing to issue its first tokenised corporate bond in September 2026. State-owned power financier REC will lead a pilot issue of less than ₹5 billion (about $57 million). Buyers will pay with the Reserve Bank of India’s wholesale central bank digital currency, and ownership will sit on a new distributed-ledger securities wallet called Demat 2.0. Settlement is meant to be near-instant. It is a careful, positive experiment that builds on work already done by SEBI and the RBI. It is a clear step in the right direction for a corporate bond market that has grown large but remains too illiquid.

A large market that still struggles with liquidity

India’s corporate bond market has expanded to roughly ₹59-60 lakh crore outstanding. Fundraising has been healthy, yet secondary-market trading stays thin. Daily volumes are low relative to the stock of bonds, and the market remains dominated by buy-and-hold behaviour, especially for anything below the highest ratings. SEBI Chairman Tuhin Kanta Pandey flagged the problem in May 2026 when he announced the tokenisation pilot at the CareEdge Debt Market Summit. He said the test would examine whether distributed ledger technology could deliver faster settlement, better traceability, automated servicing and greater transparency, with the hope of improving liquidity.

What tokenisation actually changes

Tokenisation records ownership, issuance, trading and settlement on a blockchain or distributed ledger. Traditional corporate bonds still settle on a T+2 cycle in many cases. On a properly designed ledger the transfer of the security and the payment can happen together almost at once. That cuts counterparty risk and the need for some of the collateral and guarantee arrangements that currently sit in the middle. Using the wholesale digital rupee for the cash leg strengthens the design further. The RBI has already tested wholesale CBDC for government securities settlement, inter-bank call money, and tokenised certificates of deposit through its Unified Markets Interface. Linking a tokenised corporate bond to the same rails is a logical next step.

Why REC was the sensible choice for the first test

Choosing REC, a well-known Maharatna public-sector company, keeps the first test conservative. The issue will be limited to a select group of investors who hold both a wholesale CBDC wallet and the new Demat 2.0 wallet being built by the depositories. There is a three-month lock-in, and exchanges are expected to create a secondary market by December. SEBI and the RBI are working together. India already uses distributed-ledger tools in a limited way for monitoring security creation and bond covenants. The pilot simply extends the technology into issuance and settlement itself.

India is not starting from zero

This approach puts India in the company of markets that have already run similar experiments. Hong Kong has issued multiple tokenised green bonds, including a large multi-currency offering that settled partly in digital central-bank money. European institutions such as the European Investment Bank have also issued digital bonds. Early evidence from the Bank for International Settlements and others suggests tokenised bonds can show tighter bid-ask spreads and comparable issuance costs even while volumes remain modest.

The limits of a pilot this size

There are valid reasons for caution. The pilot is small. Only selected investors can participate at first. The secondary market does not yet exist. Technology and operational risks, including smart-contract reliability and the eventual challenges of quantum computing, still need careful handling. Legal finality of on-ledger transfers and the precise treatment of bondholder rights must be tested in practice. A pilot of this size will not transform liquidity overnight, nor will it suddenly open the market to large numbers of retail investors.

Those limitations do not weaken the case. They define what a sensible pilot looks like. SEBI has said the exercise will run on a limited scale for six to nine months before any decision on wider use. That is the right posture. The goal is not to replace the existing bond market tomorrow. It is to prove whether the technology can make the existing market simpler, faster and more efficient without compromising investor protection.

What should happen after September

The way forward is clear. Let the September REC issue run its course. Publish transparent results on settlement times, operational frictions, investor experience and any unexpected costs. If the outcomes are positive, expand the circle of issuers and investors in measured stages. Keep the focus on regulated, permissioned infrastructure rather than public crypto networks. Continue close coordination between SEBI and the RBI so that the securities leg and the settlement leg stay aligned. Over time, successful tokenisation can support smaller ticket sizes, automated coupon payments and better secondary-market activity. That would help India’s corporate bond market do more of the heavy lifting that a growing economy requires.

Source:

1. “EXCLUSIVE: India Plans First Tokenised Bond Issue in September, Sources Say.” Reuters, August 24, 2026. https://www.reuters.com/world/india-plans-first-tokenised-bond-issue-september-sources-say-2026-08-24/.

2. “India’s First Tokenised Bonds to Launch in September.” India Today, August 24, 2026. https://www.indiatoday.in/business/story/indias-first-tokenised-bonds-to-launch-in-september-2978848-2026-08-24.

3. “India Plans First Tokenised Bond Issue in September: Report.” The Economic Times, August 24, 2026. https://economictimes.indiatimes.com/markets/bonds/india-plans-first-tokenised-bond-issue-in-september-report/articleshow/133464895.cms.

4. Acharya, Shristi. “India To Launch First Tokenised Corporate Bonds In Sept, REC To Be First Issuer.” Outlook Business, August 24, 2026. https://www.outlookbusiness.com/corporate/india-to-launch-first-tokenised-corporate-bonds-in-sept-rec-to-be-first-issuer.

5. “India Plans First Tokenised Bond Issue In Sept; REC To Pilot Blockchain-Based Securities: Report.” NDTV Profit, August 24, 2026. https://www.ndtvprofit.com/markets/india-plans-first-tokenised-bond-issue-in-sept-rec-to-pilot-blockchain-based-securities-report-11952032.

6. Albu, Paula. “India Plans First Tokenised Bond Issue in September.” The Paypers, August 27, 2026. https://thepaypers.com/crypto-web3-and-cbdc/news/india-plans-first-tokenised-bond-issue-in-september.

7. Pandey, Tuhin Kanta. “Address by Chairman at CareEdge Debt Market Summit.” Securities and Exchange Board of India, May 26, 2026. https://www.sebi.gov.in/media-and-notifications/speeches/may-2026/address-by-chairman-at-careedge-debt-market-summit_101625.html.