India’s financial landscape is evolving with Sebi’s launch of ‘Demat 2.0’, a groundbreaking pilot project for tokenisation of corporate bonds, promising instant atomic settlement and integration with RBI’s wholesale CBDC.
Key Points
- Sebi has launched ‘Demat 2.0’, a pilot project for tokenisation of corporate bonds, enabling instant atomic settlement.
- Demat 2.0 integrates with RBI’s wholesale Central Bank Digital Currency (CBDC) via the Unified Market Interface (UMI).
- This initiative positions India as the first country to issue corporate bonds natively on a distributed ledger with CBDC settlement.
- The technology leverages Distributed Ledger Technology (DLT) and smart contracts for enhanced efficiency and reduced errors in bond transactions.
- Alongside Demat 2.0, new UPI innovations like ‘Tap & Pay’ and AI-powered MyUPI were also introduced for improved customer experience.
Markets regulator Sebi on Thursday announced launch of ‘Demat 2.0’, a pilot project on tokenisation of corporate bonds, enabling atomic settlement that allows instant transaction.
Demat 2.0 is connected to RBI’s wholesale CBDC through Unified Market Interface (UMI) of Reserve Bank of India.
The announcement was made jointly by RBI Governor Sanjay Malhotra and Sebi Chairman Tuhin Kanta Pandey at the Global Fintech Fest.
Malhotra also announced launch of two customer-centric UPI innovations — UPI ‘Tap & Pay’ on Point-of-Sale (POS) terminals and MyUPI, a customer support solution powered by NPCI’s Small Language Model (FiMI).
Understanding Demat 2.0 and Corporate Bond Tokenisation
Demat 2.0 is the new market infrastructure developed to test a new way of issuing, holding, trading and settling corporate bonds.
The bond is created as a digital token on a distributed ledger – a shared electronic record maintained simultaneously by market infrastructure institutions using Distributed Ledger Technology (DLT). The ledger is owned by the depositories.
“This (Demat 2.0) enables atomic settlement, i.e., the bond and the money move instantaneously,” the Securities and Exchange Board of India (Sebi) said in a statement.
The technology improves the efficiency of transactions in securities market. Asset servicing, including interest payments and redemption, can be handled automatically through smart contracts — instructions written into the ledger that execute on their own.
On the shared ledger, the details of bondholder are visible to all authorised institutions at once, and payment reaches the bondholders’ CBDC wallets on the due date.
“Taken together, these features are expected to make the issue, settlement and servicing of corporate bonds faster, more efficient and less error-prone,” Sebi added.
India’s Pioneering Role in Global Tokenisation
Tokenisation pilots and commercial launches have taken place across the globe. Globally, tokenisation has largely been undertaken by individual issuers on separate platforms.
India is the first country in which corporate bonds have been issued natively on a distributed ledger, with the record of ownership held by a country’s statutory depositories and the funds leg settled in central bank digital currency, within the existing regulated market infrastructure, Sebi said.
Three companies (REC, L&T, and IIFL) have issued tokenised bonds so far, aggregating Rs 1,025 crore.
The pilot is being taken forward in phases. Issuances under the first phase are ongoing.
New UPI Innovations for Enhanced Payments
UPI ‘Tap & Pay’ on POS allows users to make faster payments by unlocking their NFC-enabled smartphone and tapping it on an NFC-enabled Point-of-Sale (POS) terminal.
The feature does not rely on user’s mobile internet connectivity as transactions can be completed using the POS machine’s internet connection. The feature is designed to make everyday payments faster and seamless for consumers.
MyUPI, an AI-powered platform built on NPCI’s Small Language Model (FiMI), introduces a suite of intelligent enhancements in UPI Help aimed at strengthening trust, safety, and convenience across the UPI ecosystem.
Ajay Kumar Choudhary, Non-Executive Chairman and Independent Director, NPCI, along with senior bankers, fintech founders, and other participants from the banking and fintech ecosystem, were also present on the occasion.
National Payments Corporation of India (NPCI) is the umbrella entity responsible for operating retail payments and settlement systems in India. It has been established by the RBI and the Indian Banks’ Association (IBA).
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