REC Limited has taken a major step in India’s debt market with the issue of ₹500 crore of tokenised corporate bonds. The company says this is India’s first pilot issue of tokenised corporate bonds under the Securities and Exchange Board of India (SEBI) Regulatory Sandbox Framework.
The issue took place on September 7, 2026. REC, a Maharatna Central Public Sector Enterprise under the Ministry of Power, used the pilot to test a new digital system for the issue, settlement and holding of corporate bonds. The main aim was simple: make the bond process faster, safer and easier by use of digital technology.
The size of the issue was ₹500 crore. It had a base issue of ₹100 crore and a green shoe option of ₹400 crore. The bond received bids worth ₹796 crore. This means the issue was oversubscribed by about eight times. REC accepted ₹500 crore at a coupon rate of 7.30% per annum for a tenor of 1 year and 9 months. The bonds were listed on both NSE and BSE.
What Makes This Bond Different
At first look, this may seem like a normal corporate bond issue. REC raises money from investors and gives them a fixed coupon. But the main difference is in the way the bond exists and moves after the issue.
A tokenised bond has a digital record of ownership on a distributed ledger. In simple words, the bond is represented in a secure digital system that can record who owns it and when ownership changes. This can reduce the need for several separate records and checks across the settlement process.
The idea is not to replace the bond itself with a new type of financial product. The bond remains a regulated security. The main change is in the digital system that records ownership and helps settle the transaction.
This is where the REC pilot becomes important. It tests whether a regulated bond market can use new technology without removing the safeguards that already protect investors.
Same-Day Settlement Is the Big Change
One of the most important features of the REC issue is same-day settlement.
In a normal bond transaction, several steps take place between the time an investor buys a bond and the time the investor receives the security. Money and securities may pass through different systems. Each step can create a need for checks, matching and reconciliation.
The tokenised model seeks to make this process much faster.
REC said the pilot allowed pay-in, allotment and listing of the bonds on the same day. It also introduced atomic Delivery-versus-Payment, or DvP, settlement. In very simple terms, this means the payment and the transfer of the security can take place together.
This matters because there is less time between the movement of money and the movement of the security. That can lower settlement risk and reduce some of the manual work that financial institutions must do.
Role of SEBI and RBI
The REC bond is part of a wider effort by SEBI and the Reserve Bank of India (RBI) to test new financial technology within a controlled framework.
SEBI’s Regulatory Sandbox allows new financial products, services and systems to be tested under specific rules and limits. The purpose is to see how a new idea works in the real market while keeping proper controls in place.
The REC pilot also forms part of the broader Demat 2.0 idea. Under this system, tokenised securities can be held through a digital securities wallet linked to distributed ledger technology.
Earlier reports said the system could also work with the RBI’s central bank digital currency, or digital rupee, for the payment side of the transaction. This creates a setup where the digital security and digital money can work on connected rails.
That is a major reason why this pilot has drawn attention. It is not only about putting a bond on a digital ledger. It tests how the security and payment sides of a capital market deal can work together.
Strong Investor Demand
The investor response also stands out.
REC had a total issue size of ₹500 crore, but bids reached ₹796 crore. That is close to eight times the amount accepted by the company. Such demand gives the pilot an added level of importance because it shows that investors were ready to take part in a new form of bond settlement.
The strong demand does not mean that tokenised bonds are ready to replace normal bonds across India. This remains a pilot under a controlled framework. Still, the response gives regulators and market institutions useful evidence about investor interest.
REC was also a suitable issuer for such a test. It is a regular participant in India’s debt market and has a strong credit profile. This gives investors a familiar name while the market tests unfamiliar technology.
What Is Demat 2.0?
For many people, Demat 2.0 may sound complex. The basic idea is quite simple.
Today, investors hold shares and bonds through demat accounts. The records of those securities sit within the existing depository system. Demat 2.0 is meant to add a new digital layer for tokenised assets.
Under the proposed model, ownership of a tokenised bond can be recorded on a permissioned distributed ledger. A permissioned system means access is controlled. It is not an open network where anyone can freely enter and change records.
This can help create a shared record for authorised participants. Instead of several parties keeping separate records and later matching them, the system can allow them to rely on a common digital record.
The goal is not technology for its own sake. The real goal is a faster and cleaner capital market process.
Why This Matters for India’s Debt Market
India’s corporate bond market has grown sharply over the years. Yet the market still faces issues such as limited liquidity, fragmented bond issues and a relatively small number of bonds that trade actively each day.
SEBI has said that India had nearly 33,000 outstanding corporate bond instruments, but only about 400 to 500 trade on a typical day. Outstanding corporate bonds had crossed ₹60 trillion by the end of July 2026.
Against this background, better market infrastructure can have real value.
Tokenisation alone cannot solve the liquidity problem. A digital bond will not become easy to trade just because its ownership sits on a distributed ledger. Investors still need buyers and sellers. Market makers, trading platforms and clear rules will remain important.
But better settlement can remove some of the friction that exists after a trade. If the process becomes quicker and easier, it could help make the wider bond market more efficient over time.
What Comes Next
The REC transaction is only the first major test. The next question is whether this model can work at a much larger scale.
A successful pilot could encourage other issuers to test tokenised bonds. Banks, financial institutions and other large borrowers could find value in faster settlement and better digital records.
There are also other questions that regulators will need to answer. These include cybersecurity, system stability, links between different platforms and the ability of investors to trade these securities in a wider market.
The secondary market will be especially important. A tokenised bond has limited value if investors can buy it but cannot easily sell it later. Market participants have therefore been watching the future development of a secondary market for these securities.
A Small Issue With a Bigger Purpose
The ₹500 crore REC issue is not large enough to change India’s bond market on its own. Its importance lies elsewhere.
It shows that India’s regulators and financial institutions are ready to test a new way to issue, hold and settle securities. It also shows that this test can take place within the existing regulatory structure rather than outside it.
The ₹796 crore bid book, the 7.30% coupon, the 1 year and 9 month tenor, and the same-day settlement all give the pilot a clear real-world test.
For investors, the bond remains a debt security with a defined return and maturity. For the market, however, the transaction offers a glimpse of how future bond markets may work.
The biggest lesson from REC’s first tokenised corporate bond is therefore not the word “tokenised”. It is the possibility of a faster connection between money, securities and ownership records.
If regulators and market institutions can make this model safe, reliable and easy to use, the REC pilot could become the first step towards a new chapter for India’s debt market.
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