Finance Meets Blockchain at E-Sutra's Bond Tokenisation Summit

India could significantly widen participation in its bond market by using blockchain-based tokenisation to allow investors to buy smaller portions of debt securities, financial and technology executives said at the E-Sutra Zee Business Bond Tokenisation Summit in Mumbai.

The summit discussed real world asset tokenisation and its advantages, technologies and requirement for regulations and guardrails over several power-packed panels and firesides with key players. All this within 24 hours of prime minister Narendra Modi speaking about tokenisation at the neighbouring Global Fintech Festival, also in Mumbai.

Speaking at the summit, executive director of REC Ltd Mohan Lal Kumawat and E-Sutra's Kanhaiya Singh said tokenisation could reduce the time and cost involved in issuing and settling bonds while making traditionally institutional products accessible to retail investors. REC has for the first time in India successfully raised Rs 500 crore through tokenised bonds.

"Tokenisation is not a complex technological game. It is a means of democratising financial services," said Kanhaiya Singh, co-founder of E-Sutra.

India's bond market is dominated by institutional investors such as banks, insurance companies and pension funds, while participation by retail investors remains limited, in part because of the relatively high face value of many bonds.

Tokenisation could allow bonds to be divided into fractional units, enabling smaller investors to gain exposure without having to purchase an entire bond, the speakers said.

REC Executive Director Mohan Lal Kumawat said the state-owned power-sector financier had recently completed a pilot involving tokenised bonds.

Traditional bond issuance and settlement can take two to three days, while the tokenised bond trial was completed within about two hours, Kumawat said.

The pilot mapped 20 institutional investors over 20 days, with 18 receiving allocations immediately, he said.

The initiative also demonstrated growing banking support for digital-wallet infrastructure. While one bank was initially ready to participate, five major banks had joined the network by the end of the trial, Kumawat said.

REC, one of India's major bond issuers, raises about 1 trillion rupees ($11.9 billion) annually through the bond market, according to the panel.

Technology expert and Blockmaze CEO Tejinder Virk said tokenisation could eventually allow small savers, including homemakers, to invest relatively modest amounts in highly rated corporate debt.

For example, a person saving 1,000 rupees could potentially use such a platform to gain exposure to a tokenised, AAA-rated bond rather than limiting their savings to traditional avenues such as gold, he said.

The comparison with India's dematerialisation of shares was also raised during the discussion. The introduction of demat accounts replaced paper share certificates and helped create the infrastructure for electronic securities trading.

The panelists argued that tokenisation could represent a further evolution of that process by enabling programmable, fractional ownership and potentially faster settlement.

Singh said India could eventually tokenise a substantial pool of real-world assets, estimating the potential market at around $600 billion.

Unlike cryptocurrencies, tokenised real-world assets represent claims on underlying assets or securities and can operate within regulated financial markets, the speakers said.

India already has much of the digital infrastructure required for wider adoption, including electronic know-your-customer systems, DigiLocker, the Unified Payments Interface and the Reserve Bank of India's wholesale central bank digital currency, the panel said.

The next major step will be establishing clear regulatory rules governing tokenised securities, the speakers said.

They compared India's bond market to a bamboo plant that spends years developing roots before experiencing rapid growth.

With an appropriate regulatory framework, the number of bond investors in India could rise substantially from current levels, the panelists said, although such projections depend on regulatory adoption and investor participation.

The discussion comes as Indian policymakers and financial institutions increasingly explore the use of blockchain and tokenisation in capital markets, with the technology seen as a potential way to make securities markets more efficient while broadening access to financial assets.