Demat 2.0 explained: Why it matters for bond market investors
For investors in corporate bonds, the launch of Sebi’s Demat 2.0 pilot could change how bond transactions are settled and how payments are received. The tokenised bond system is designed to enable faster settlement, quicker access to funds from secondary-market transactions and automated processing of interest and redemption payments.
What is Demat 2.0?
Demat 2.0 is a new market infrastructure developed to test the tokenisation of corporate bonds.
Under the system, a bond is created as a digital token on a distributed ledger. The ledger is a shared electronic record maintained simultaneously by market infrastructure institutions using distributed ledger technology (DLT), while the ledger is owned by the depositories.
Demat 2.0 is connected to the RBI’s wholesale central bank digital currency (CBDC), or e-rupee, through the Unified Market Interface.
This enables atomic settlement, where the bond and money move instantaneously.
For investors, this means the securities and corresponding funds can move at the same time, removing the gap between the completion of the two sides of a transaction.
Faster access to funds after selling bonds
One of the key changes for investors is the time taken to receive money from secondary-market transactions.
Sebi said investors can receive funds immediately in secondary-market transactions under Demat 2.0. Under the earlier process, funds generally took two to three days to be received.
The shorter settlement timeline means funds from a completed secondary-market transaction can be deployed elsewhere immediately.
Interest and redemption payments can be automated
Demat 2.0 also seeks to change how investors receive interest and redemption payments on their bonds.
Currently, the issuer or its registrar needs to obtain the list of bondholders from the depositories, calculate the amount payable to each holder and route the payments separately through the banking channel.
Under Demat 2.0, bondholder details are visible to authorised institutions on the shared ledger. Smart contracts — instructions written into the ledger that execute automatically — can trigger interest and redemption payments.
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Sebi said payments in e-rupee can reach bondholders’ CBDC wallets on the due date.
For investors, this means interest and redemption payments can be processed automatically through the new infrastructure.
Settlement risk eliminated
Atomic settlement is another feature that Sebi has highlighted.
Under the system, the bond and money move instantaneously. Sebi said this eliminates settlement risk, as one side of the transaction does not remain pending after the other side has been completed.
Three issuers have raised Rs 1,025 crore
Three companies have issued tokenised bonds so far under the pilot, raising a combined Rs 1,025 crore.
REC was the first issuer on September 7, 2026. The public sector NBFC raised Rs 500 crore from 18 investors.
L&T was the second issuer on September 9, raising Rs 500 crore from four investors.
IIFL was the third issuer on September 9, raising Rs 25 crore from one investor.
The pilot is being implemented in phases. The first phase is currently focused on issuances. Later phases will extend the system to buying and selling tokenised bonds through existing request-for-quote (RFQ) platforms and eventually to retail investor access.
What Demat 2.0 means for investors
From an investor’s perspective, the pilot introduces several changes to the way corporate bond transactions and payments can be handled.
Immediate secondary-market funds: Investors can receive funds immediately from secondary-market transactions, compared with the earlier two-to-three-day timeline.
Simultaneous settlement: Atomic settlement allows the bond and money to move instantaneously.
Lower settlement risk: Sebi said settlement risk is eliminated because the two sides of the transaction do not remain pending separately.
Automated interest payments: Smart contracts can trigger interest payments on the due date.
Automated redemption: Redemption payments can also be triggered through smart contracts.
Direct e-rupee payments: Interest and redemption payments can reach bondholders’ CBDC wallets in e-rupee on the due date.
India’s approach to tokenised bonds
Sebi said tokenisation pilots and commercial launches have taken place globally, including Project Helvetia III in Switzerland and Project Evergreen in Hong Kong. Tokenised treasury bonds and bonds from BlackRock, JPMorgan and the Asian Infrastructure Investment Bank are also among the global examples cited by Sebi.
According to Sebi, tokenisation in these cases has largely been undertaken by individual issuers on separate platforms.
India’s approach under Demat 2.0 is to issue corporate bonds natively on a distributed ledger, with the record of ownership held by statutory depositories and funds settled in central bank digital currency within the existing regulated market infrastructure.
For bond investors, the pilot is currently focused on issuance, while future phases are expected to bring tokenised bonds into secondary-market buying and selling and eventually extend access to retail investors.
This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an Investment Adviser. Gaurav and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.
