India To Launch First Tokenised Corporate Bonds In Sept, REC To Be First Issuer

India will introduce tokenised corporate bonds next month, testing blockchain technology for instant settlement of bond transactions, according to a Reuters report. State-owned power financier REC will be the first to issue these notes, placing India among markets such as Europe and Hong Kong that already use the technology for bond issuance and settlement.

Tokenised bonds record ownership, issuance, trading and settlement digitally on a blockchain or distributed ledger, allowing transactions to be completed almost instantly. India's markets regulator and central bank are jointly working to push the technology forward, sources told Reuters, speaking on condition of anonymity since the discussions remain confidential.

REC will issue tokenised bonds worth less than 5 billion rupees, or around $57 million, as part of the offering. It is expected to be unveiled at an annual financial technology event in Mumbai next month. Purchases will be made using India's central bank digital currency, the report said, adding that details about the issuer, timeline and framework had not been reported earlier. At the pilot stage, the offering will be available only to a select group of investors.

How Investors Will Access The Bonds

To participate, investors will need two digital accounts: a wholesale digital currency wallet issued by a bank, and a new electronic securities wallet. Indian depositories are developing this securities wallet, called DEMAT 2.0, a first of its kind, which will record bond holdings on a distributed ledger. Subsequent trades will only be possible between participants holding both compatible currency and securities wallets, the report said.

The bonds will carry an initial three-month lock-in period, and exchanges are expected to develop a secondary market for them by December. The securities will not be traded on the conventional electronic book provider platform, according to the report.