The Reserve Bank of India (RBI) has launched an ambitious pilot program that aims to tokenise Certificates of Deposit (CDs) using its wholesale central bank digital currency (CBDC-W). This move signals a decisive leap in India’s digital financial transformation. The RBI wants to modernize the country’s financial infrastructure, boost efficiency in the money markets, and lay the foundation for a fully tokenized financial ecosystem.
The announcement, made on October 7, 2025, marks one of the most significant steps in India’s digital currency evolution since the introduction of the wholesale CBDC in late 2022. The pilot will allow select banks and financial institutions to issue and trade tokenised CDs on a distributed ledger maintained by the RBI.
This initiative will not only streamline liquidity management but also demonstrate how tokenization can revolutionize traditional debt and money-market instruments.
Understanding Certificates of Deposit and Their Role
A Certificate of Deposit is a short-term financial instrument that banks issue to raise funds. Institutional investors, mutual funds, and corporations buy these CDs because they offer higher interest than traditional savings accounts and carry minimal credit risk.
In India, CDs form an essential part of the money market, which provides short-term funding for banks and corporations. These instruments usually trade in dematerialized form through the Negotiated Dealing System – Order Matching (NDS-OM) platform and settle via the Clearing Corporation of India (CCIL).
While the existing system functions well, it still involves multiple intermediaries, manual reconciliations, and settlement lags. The RBI now wants to replace these inefficiencies with blockchain-based tokenisation.
What Tokenisation Means in Practice
Tokenisation converts traditional financial instruments into digital tokens recorded on a blockchain or distributed ledger. Each token represents ownership of a specific asset — in this case, a Certificate of Deposit.
Once tokenised, these assets can be issued, traded, and settled instantly, without relying on paper-based or legacy settlement systems. The blockchain ensures transparency, traceability, and real-time verification of transactions.
In the RBI pilot, the wholesale CBDC (e₹-W) will serve as the settlement currency. Every transaction will settle in digital rupees directly on the blockchain, eliminating the need for third-party clearinghouses.
This direct settlement approach reduces counterparty risk and nearly eliminates settlement delays — two persistent challenges in India’s interbank market.
Why the RBI Chose Certificates of Deposit First
The RBI’s decision to start with CDs is deliberate and strategic. These instruments already operate in a restricted, well-regulated market dominated by institutional players. That makes them ideal for controlled experimentation with blockchain-based systems.
Tokenising CDs allows the RBI to test:
-
End-to-end digital issuance using smart contracts.
-
Secondary-market trading with atomic (instant) settlement.
-
Programmable compliance, ensuring that only eligible participants can hold or trade tokens.
-
Real-time auditability for regulators and market participants.
The pilot will help the RBI and participating banks measure performance, assess scalability, and identify regulatory gaps before expanding tokenisation to more complex instruments such as government securities, corporate bonds, or commercial papers.
How the Pilot Will Work
According to officials familiar with the matter, the RBI has invited a select group of major public and private sector banks to participate. These include the State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, and a few foreign banks with significant Indian operations.
Here’s how the pilot works:
-
Issuance:
Banks will issue digital tokens representing Certificates of Deposit. Each token corresponds to a fixed face value (say ₹1 lakh). -
Trading:
Participants will trade these tokens on a blockchain-based platform developed in collaboration with the Reserve Bank Innovation Hub (RBIH) and fintech partners. -
Settlement:
All trades will settle instantly using CBDC-W, removing the traditional T+1 or T+2 settlement delays. -
Monitoring:
The RBI will have a real-time view of all transactions, enabling proactive oversight of liquidity and credit exposures.
This system promises 24/7 market availability, near-zero operational risk, and seamless integration with banks’ core systems.
Expected Benefits
The RBI aims to achieve several clear goals through this initiative:
-
Faster Settlements:
Instant, atomic settlement eliminates delays and reduces the cost of capital for participants. -
Reduced Counterparty Risk:
Direct token-to-token settlement minimizes the risk of one party defaulting before trade completion. -
Increased Transparency:
Every transaction remains visible on a permissioned ledger accessible to regulators and participants, ensuring integrity and reducing manipulation. -
Operational Efficiency:
Smart contracts automate issuance, interest payments, and redemption, reducing manual intervention and paperwork. -
Enhanced Market Liquidity:
The ability to trade tokenised CDs in real time could attract more participants and foster deeper liquidity. -
Regulatory Insight:
Real-time visibility gives the RBI sharper tools for managing systemic risk and liquidity in the financial system.
India’s Growing Focus on Digital Finance
This pilot reflects the RBI’s ongoing commitment to modernize India’s financial system through digital innovation rather than relying solely on cryptocurrencies or private stablecoins.
India’s CBDC journey began in November 2022, when the RBI launched the wholesale CBDC pilot for government securities. Later, in December 2022, it introduced the retail CBDC for limited consumer use.
By 2025, more than 1.5 million users and 300,000 merchants had adopted the retail e-Rupee pilot. However, scaling the retail system proved challenging because of infrastructure gaps and limited incentives for end users.
In contrast, the wholesale CBDC space shows faster progress because it involves fewer, highly regulated participants and clear use cases. Tokenising CDs is a logical next step in this controlled ecosystem.
What Industry Experts Say
Financial analysts and blockchain experts see this move as a transformative milestone.
Anand Rathi, head of digital strategy at a major Indian bank, said, “The RBI’s pilot creates a bridge between the regulated financial system and blockchain technology. Once tokenisation proves its value in the money market, extending it to bonds and repo markets will happen naturally.”
Neha Sharma, fintech researcher at the National Institute of Public Finance and Policy, added, “This initiative will modernize interbank liquidity management. Banks will no longer need to wait for settlements; funds will move instantly, freeing capital and improving efficiency.”
Many experts also believe this pilot could pave the way for cross-border CBDC interoperability, allowing India to transact seamlessly with other central banks experimenting with tokenised financial assets.
Global Context: CBDCs and Tokenisation Worldwide
Central banks across the world are experimenting with similar pilots:
-
The Monetary Authority of Singapore (MAS) ran Project Guardian, testing tokenised bonds and deposits.
-
The Bank of England and European Central Bank are exploring wholesale CBDCs for interbank settlements.
-
The Hong Kong Monetary Authority (HKMA) completed Project Ensemble, which tokenised short-term debt instruments for real-time settlement.
By launching this pilot, India joins this exclusive group of innovators — but with a distinct focus on regulated market depth and domestic liquidity.
Challenges and Risks
Despite the enthusiasm, the pilot faces hurdles:
-
Technology Integration:
Banks need to upgrade their back-end systems to interact with blockchain networks in real time. -
Cybersecurity:
As transactions move fully digital, ensuring data protection and cyber resilience becomes critical. -
Legal Framework:
India’s existing securities and payment laws must adapt to recognise tokenised assets as valid legal instruments. -
Scalability:
The blockchain platform must handle high transaction volumes without performance degradation.
The RBI plans to monitor these factors closely during the pilot before expanding to broader use cases.
What Comes Next
If the pilot succeeds, the RBI will extend tokenisation to commercial papers, Treasury bills, and corporate bonds. The long-term goal is to build a unified tokenised financial market, where every instrument — from government debt to mutual fund units — trades and settles instantly in digital rupees.
The success of this pilot could also influence the design of India’s Digital Public Infrastructure (DPI), integrating tokenised assets into platforms like Account Aggregator, ONDC, and UPI.
Conclusion
With this pilot, the Reserve Bank of India positions itself at the forefront of global central banking innovation. By tokenising Certificates of Deposit through its wholesale CBDC, the RBI shows that blockchain technology can strengthen — not replace — the traditional financial system.
The experiment could redefine how money markets function, turning today’s manual, delayed processes into real-time, programmable, and transparent transactions.
If successful, India’s journey from digital payments to digital assets will not just reshape its own economy — it will set a precedent for how emerging economies embrace blockchain responsibly and strategically.
Also Read – General Electric’s accounting controversies
