Securities and Exchange Board of India (SEBI) has launched a pilot project to explore the tokenisation of corporate bonds using distributed ledger technology (DLT), with the potential to significantly improve liquidity and enable near-instantaneous settlement in India's debt market. SEBI Chairman Tuhin Kanta Pandey disclosed the initiative on Tuesday, 26 May, in remarks to reporters in New Delhi.

What the Pilot Entails

The pilot is designed to assess whether blockchain-based systems can streamline bond trading and settlement while managing the technology and operational risks involved. Pandey confirmed the scope directly: 'It's a pilot project that we have decided to initiate on use of DLT for tokenisation of corporate bonds.'

Corporate bonds in India are already traded on established platforms, but SEBI is evaluating whether DLT-based tokenisation can meaningfully lift market functioning beyond current capabilities. As Pandey put it: 'We are saying whether we can use the DLT and tokenisation method for bonds as well. Once you do that, there will be a greater possibility of more liquidity and instantaneous settlement.'

Regulatory Coordination with RBI

The initiative is not being pursued in isolation. The Reserve Bank of India (RBI) has already issued draft guidelines on DLT applications in financial markets and is expected to release final norms shortly. Pandey indicated that SEBI and the exchanges are ready to operationalise the framework as soon as regulatory clearance is received from the central bank.

The pilot will also serve as a platform to bring together key stakeholders — including issuers, intermediaries, and market infrastructure institutions — to stress-test the operational and technological model before any wider rollout is considered.

Why This Matters for India's Debt Market

India's corporate bond market has historically lagged equity markets in depth and liquidity, a gap that policymakers have long sought to close. DLT-based tokenisation could address two structural pain points simultaneously: settlement risk, which currently requires a T+1 or T+2 cycle, and fragmented secondary market participation. Notably, this pilot follows a broader global trend of central banks and securities regulators experimenting with tokenised bonds — the European Central Bank and Hong Kong Monetary Authority have conducted similar trials in recent years.

SEBI Chief on Global Equity Trends and India's Market Position

Pandey also commented on global equity market dynamics, noting that investor enthusiasm around artificial intelligence (AI), chips, memory, and electronics linked to AI infrastructure is currently driving valuations across major jurisdictions. 'Some of the leading companies at this moment are those related to AI directly or indirectly,' he said.

On comparisons between India and Taiwan in market capitalisation trends, Pandey underscored a key structural difference: India remains a diversified market, unlike Taiwan, where a handful of large technology companies dominate overall valuations. This distinction, he suggested, provides India's markets with broader resilience against sector-specific shocks.

What Comes Next

The immediate next step is the conclusion of the pilot and a review of its findings, after which SEBI and the exchanges will await RBI's final DLT guidelines before scaling the framework. If successful, the initiative could mark a structural shift in how Indian corporate bonds are issued, traded, and settled — with implications for retail participation and institutional efficiency alike.