India’s market regulator is set to test a pioneering digital securities framework next week, potentially marking the country’s first tokenised bond issuance, integrating digital rupee settlement and blockchain technology to modernise bond trading infrastructure.
India’s market regulator is preparing to test a new digital securities framework next week, with a pilot that could include the country’s first tokenised bond issuance, according to people familiar with the plan. The initial trial is expected to be linked to REC, the state-owned power financier, and to coincide with the Global Fintech Fest.
The proposal would pair a new securities wallet, called Demat 2.0, with the Reserve Bank of India’s central bank digital currency for settlement. Under the plan, bond ownership would be recorded on distributed ledger technology rather than in the conventional depository system, a change that sources said should reduce the number of steps needed to execute and complete a trade.
According to people familiar with the structure of the pilot, the normal electronic book process would still be used for private placement and allotment, but the bond would move into Demat 2.0 afterwards. Investors are expected to avoid a second demat account or a fresh know-your-customer check, while payment would be handled through a digital rupee wallet linked to a bank account.
Industry participants say the choice of REC makes sense because it is a frequent borrower in the public-sector bond market and carries a top-rated credit profile. Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP, said the wider significance of the pilot is that securities and money settlement would run on connected digital rails, cutting reconciliation delays and counterparty risk. Nishchay Nath, founder and chief executive of BondScanner, said the trial is tightly controlled, aimed at select investors rather than the retail market, and still lacks an open secondary market. Prabhkaran Singh Lalli, a partner at Advonet, said the most important shift is not tokenisation itself but the decision by the Securities and Exchange Board of India and the RBI to settle securities and cash on the same infrastructure.
The pilot is being treated as a test case for a broader market structure, with the depositories’ technology teams working jointly on the project. For now, the focus is on proving whether tokenised issuance, settlement and servicing can work smoothly within regulated channels before any wider expansion to trading or secondary market activity.
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