The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have launched Demat 2.0, a pilot initiative designed to test the tokenisation and digital settlement of corporate bonds.
The initiative was announced on September 10, 2026, at the Global Fintech Fest in Mumbai by RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kanta Pandey.
Demat 2.0 combines Distributed Ledger Technology (DLT), RBI’s wholesale Central Bank Digital Currency (CBDC), and smart contracts to create a more integrated system for issuing, holding and settling corporate bonds.
The pilot aims to enable atomic settlement, meaning the transfer of the security and the corresponding payment can take place together. This could reduce settlement risks and make parts of the bond-market process faster and more efficient.
Importantly, Demat 2.0 is not a new demat account that every retail investor needs to open. The current initiative is a pilot focused primarily on tokenised corporate bonds.
What Is Demat 2.0?
Demat 2.0 can be understood as the next stage in the digitalisation of India’s securities market.
The original demat system replaced physical share certificates with electronic securities. Demat 2.0 is now testing whether securities can be represented as digital tokens on a distributed ledger, while connecting the securities transaction with digital payment infrastructure.
In simple terms:
Demat 1.0: Physical securities → Electronic securities
Demat 2.0: Electronic securities → Tokenised securities + Integrated digital settlement
However, it is important to note that Demat 2.0 is currently a pilot project, not a complete replacement for India’s existing demat and securities infrastructure.
Why Are Corporate Bonds the First Focus?
SEBI has initially selected corporate bonds for the pilot rather than applying the technology immediately to equities.
Corporate bonds have a significant institutional investor base and involve several settlement and servicing processes. This makes the bond market a suitable environment for testing new financial-market technology.
The pilot can allow regulators and market participants to understand how tokenisation works in a controlled environment before considering wider adoption.
SEBI has indicated that secondary-market trading is also being explored as the project moves into later stages.
What Are Tokenised Bonds?
Tokenisation means creating a digital representation of an asset on a distributed ledger.
For example, suppose a company wants to issue ₹500 crore of corporate bonds.
Under the traditional process, the bonds are issued and recorded through the existing securities infrastructure, while payment takes place through established banking and settlement systems.
Under the tokenised model, the bond can be represented digitally on a DLT-based system and connected with digital payment infrastructure.
This creates the possibility of linking the movement of the bond and the movement of money much more closely.
What Is Atomic Settlement?
One of the most important features being tested under Demat 2.0 is atomic settlement.
Consider a simple example.
An investor wants to purchase a corporate bond worth ₹10 lakh.
In a conventional settlement process, the movement of securities and money involves separate systems and processing steps.
With atomic settlement, the objective is to make the two movements happen together:
Payment transferred → Bond transferred
If the required transaction conditions are not fulfilled, the transaction does not complete.
This could reduce settlement and counterparty risks.
How Will RBI’s Digital Rupee Be Used?
RBI’s wholesale Central Bank Digital Currency (CBDC) is an important part of the Demat 2.0 framework.
The initiative uses digital payment infrastructure to connect the settlement of tokenised securities with digital money.
The system also involves the Unified Market Interface (UMI).
In simple terms, Demat 2.0 is bringing together three important technologies:
Tokenised Bonds + Digital Rupee + Distributed Ledger Technology
This combination is one of the key differences between the new pilot and India’s existing securities settlement infrastructure.
What Role Will Smart Contracts Play?
Smart contracts can help automate certain processes related to securities.
For corporate bonds, these may include activities such as:
- Interest payments
- Redemption
- Other scheduled servicing events
Instead of requiring every process to be handled manually, certain predefined conditions could trigger automated actions through smart contracts.
This could reduce manual processing and reconciliation requirements while improving operational efficiency.
Companies Already Using the Tokenised Bond Platform
The pilot has already seen participation from companies including REC Ltd, Larsen & Toubro (L&T), and IIFL Finance.
| Company | Amount Raised | Bond Details |
| REC Ltd | ₹500 crore | Around 20-month bond, 7.30% coupon |
| Larsen & Toubro | ₹500 crore | 3-year bond, 7.40% coupon |
| IIFL Finance | ₹25 crore | 2-year bond, 9.10% coupon |
| Total | ₹1,025 crore | Initial tokenised bond issuances |
These transactions provide an early test of how tokenised corporate bonds can operate within India’s regulated financial-market ecosystem.
Who Is Involved in Demat 2.0?
Demat 2.0 involves several parts of India’s financial-market infrastructure.
Key participants include:
- SEBI
- RBI
- CDSL
- NSDL
- BSE
- NSE
- NPCI
- HDFC Bank
- ICICI Bank
The involvement of exchanges, depositories and banks is important because a tokenised securities system will need to work alongside India’s existing financial infrastructure.
Do Investors Need a New Demat Account?
No, not at this stage.
This is an important point because the name “Demat 2.0” could create confusion among retail investors.
The pilot does not mean that investors must immediately open a completely new demat account.
Tokenised bonds can be held through the existing demat ecosystem during the pilot.
Therefore, investors should not interpret the launch as the immediate replacement of their existing demat accounts.
Can Retail Investors Use Demat 2.0?
The current pilot is mainly focused on institutional participation.
Retail investor access is expected to become more relevant in later phases, particularly if tokenised securities and secondary-market trading are successfully tested.
This means ordinary investors may not see major changes in their day-to-day demat accounts immediately.
The technology is currently being tested before wider implementation.
What Could Be the Next Phase?
The development can broadly be understood in three stages.
Phase 1: Tokenised Bond Issuance
The initial focus is on issuing and settling corporate bonds using the new infrastructure.
Phase 2: Secondary-Market Trading
The next major step will be enabling tokenised bonds to be traded more actively in the secondary market.
Phase 3: Wider Investor Access
If the system proves reliable, regulators could eventually consider broader access, including retail investors.
The move into secondary trading will be particularly important because successful issuance alone does not guarantee sufficient market liquidity.
Benefits of Demat 2.0 for Investors
If the system is successfully scaled, investors could potentially benefit in several ways.
Faster Settlement
The integration of securities and payment could make settlement more efficient.
Lower Settlement Risk
Atomic settlement could reduce the risk that one side of a transaction is completed while the other side is delayed or fails.
Better Transparency
Distributed ledger technology can provide a consistent digital record of transactions and ownership.
Automated Bond Servicing
Interest payments and redemption-related processes could potentially be automated through smart contracts.
Less Manual Reconciliation
Connecting securities and payment systems could reduce the need to manually match records across different systems.
How Could Companies Benefit?
The benefits are not limited to investors.
Corporate issuers could potentially see improvements in:
- Bond issuance processes
- Settlement efficiency
- Operational costs
- Record management
- Interest and redemption processing
- Transaction transparency
However, these benefits still need to be demonstrated at scale. The current pilot is designed precisely to test whether these advantages can work effectively in the real market.
Could Demat 2.0 Transform India’s Corporate Bond Market?
Potentially, yes.
If the technology is successfully adopted, several stages of the corporate bond lifecycle could eventually become more integrated:
Issuance → Holding → Trading → Settlement → Interest Payment → Redemption
Instead of relying on multiple disconnected processes, these activities could increasingly operate through connected digital infrastructure.
This could make India’s corporate bond market more technology-driven and potentially more efficient.
However, secondary-market liquidity remains an important challenge. A tokenised bond still needs enough buyers and sellers to create an active market.
Will Shares Also Become Tokenised?
Not immediately.
The current pilot is primarily focused on corporate bonds.
However, tokenisation could potentially be extended to other financial assets in the future.
Possible areas include:
- Equities
- Mutual funds
- Gold
- Other securities and financial assets
Therefore, it would be premature to say that SEBI has already moved all Indian shares onto blockchain or DLT technology.
The current initiative is an experiment focused on a specific segment of the securities market.
What Are the Biggest Challenges?
Despite its potential, Demat 2.0 also faces several challenges.
Cybersecurity
Financial assets are highly sensitive, so strong cybersecurity will be essential.
Interoperability
The new system needs to work smoothly with existing exchanges, depositories, banks, brokers and payment infrastructure.
Market Liquidity
A tokenised security will only become useful as a tradable asset if there are enough buyers and sellers.
Regulation
Ownership, taxation, accounting, custody and investor-protection rules will need to remain clear as tokenised assets become more common.
Operational Resilience
The infrastructure must be capable of handling large transaction volumes without creating new systemic risks.
Demat 1.0 vs Demat 2.0
| Feature | Demat 1.0 | Demat 2.0 |
| Main development | Electronic securities | Tokenised securities |
| Current status | Established system | 2026 pilot |
| Initial focus | Securities in electronic form | Corporate bonds |
| Technology | Electronic depository infrastructure | DLT + CBDC + smart contracts |
| Settlement | Existing settlement systems | Atomic settlement being tested |
| Digital currency | Traditional payment systems | RBI wholesale CBDC |
| Smart contracts | Not a core feature | Used for automation |
| Retail investors | Widely supported | Wider access planned for future phases |
What Does Demat 2.0 Really Mean for India?
Demat 2.0 should not simply be viewed as a new version of a demat account.
Its larger significance is that SEBI and RBI are testing whether India’s securities market can combine tokenisation, distributed ledger technology, digital currency and smart contracts within a regulated framework.
If the pilot succeeds, the future securities market could become more integrated:
DLT + CBDC + Smart Contracts + Exchanges + Depositories + Banks
This could eventually change how securities are issued, settled and serviced.
However, the technology is still at the pilot stage. Its wider impact will depend on how successfully regulators and market participants solve issues related to liquidity, interoperability, cybersecurity, regulation and retail access.
Outcome
The launch of Demat 2.0 on September 10, 2026 marks an important development in India’s financial-market technology.
For now, its impact is mainly concentrated on tokenised corporate bonds and institutional investors. It does not mean that retail investors need to replace their existing demat accounts.
The real significance will become clearer as SEBI and RBI move toward secondary-market trading and potentially wider investor participation.
If successful, Demat 2.0 could become an important step in India’s transition from traditional electronic securities infrastructure toward a more integrated system built around tokenised assets, digital currency, distributed ledgers and automated settlement.
Source: SEBI
