Blockchain, Rupee and Bonds: India Modernizes Its Financial Market

India is bringing its corporate bonds onto the blockchain. The Indian financial regulator has launched Demat 2.0, a pilot project that allows the issuance and settlement of bonds in the form of digital tokens. Three companies have already raised a total of 10.25 billion rupees (approximately 92 million euros) through this new infrastructure. The system combines a private blockchain with the digital currency of the Indian central bank. Its goal is not to create a new cryptocurrency, but to accelerate financial operations that currently take several days.

Key points of this article:

• India has launched a pilot project Demat 2.0 to issue and settle bonds in the form of digital tokens.

• Three companies have already raised a total of 10.25 billion rupees through this private blockchain-based infrastructure.

Bonds Settled Immediately in Digital Rupees

A bond allows a company to borrow money from investors in exchange for interest. With Demat 2.0, this financial instrument is directly created in the form of a digital token on a ledger shared among several authorized institutions.

Unlike public blockchains like Bitcoin or Ethereum, this network remains closed. It is held by Indian depositories, the official bodies responsible for recording the ownership of financial securities.

Its main innovation comes from the settlement of transactions. When an investor buys a bond, the token and the money change hands at the same instant. The payment uses the digital version of the rupee tested by the Reserve Bank of India for transactions between financial institutions.

This mechanism eliminates the risk that one party delivers the bond without receiving payment. It also allows the issuing company to receive funds on the same day, compared to two to three days with the usual process.

Interest Payments and Final Repayment Can Be Automated. Instructions recorded in the system will trigger payments on scheduled dates, without multiple intermediaries needing to exchange and verify their files. Three companies have already raised 10.25 billion rupees.

According to the statement from the Securities and Exchange Board of India, three issuances have already been completed.

REC Limited, a state-controlled financial company, inaugurated the system on September 7 by raising 5 billion rupees from 18 investors. The industrial group Larsen & Toubro then obtained the same amount from four investors. IIFL completed the test with an issuance of 250 million rupees subscribed by a single participant.

For investors, tokenization does not change the nature of the investment. The bond retains its interest rate, its repayment date, its credit rating, and the protections provided by regulation. It also remains visible in the usual securities account.

No new identity verification is necessary. Depositories hold the digital keys on behalf of investors, who only need to activate Demat 2.0 and have a digital rupee wallet with a participating bank.

The deployment will continue in three phases. The first concerns issuances intended for institutions. The second will open trading on the secondary market and is expected to extend access to individuals. A final phase could integrate more regulated players and other categories of financial securities.

The project is conducted in a testing environment supervised by the regulator. India is therefore not replacing its bond market with an independent crypto system: it is modernizing its existing infrastructure while maintaining the same rules and intermediaries. If the pilot confirms the announced gains, Demat 2.0 could primarily reduce the delays, errors, and administrative costs associated with corporate bonds.

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