What does SEBI’s tokenised bonds mean for investors

The Securities and Exchange Board of India (SEBI) has launched a pilot program titled Demat 2.0 to modernize the settlement and ownership recording of corporate bonds. By utilizing a private digital network, the initiative represents bond ownership as digital tokens rather than traditional database entries, aiming to streamline administrative processes. A critical component of this pilot is the integration of the Reserve Bank of India’s digital rupee (e₹) to facilitate atomic settlement, ensuring that bond transfers and payments occur simultaneously. This mechanism significantly reduces counterparty risk by eliminating the gap between delivery and payment. While the underlying investment characteristics such as credit ratings and maturity remain unchanged, the system enables automated corporate actions like coupon payments and redemptions. Currently, the pilot excludes retail investors, focusing instead on institutional testing before expanding to secondary market trading. This development marks a significant shift toward blockchain-based infrastructure in the Indian financial sector, prioritizing operational efficiency and reduced manual intervention.