Faster, Automated, Transparent: SEBI Prepares To Pilot Corporate Bond Tokenisation
In what is being seen as a big boost to the adoption of blockchain technology, India's capital markets regulator is preparing to pilot the tokenisation of corporate bonds using distributed ledger technology (DLT), as it looks to deepen the country's debt market and reduce the economy's heavy reliance on bank financing. This comes from Securities and Exchange Board of India chief Tuhin Kanta Pandey himself. He was speaking at a finance and debt market event in Mumbai.
The proposed pilot, expected to be rolled out within six to nine months, would test whether tokenised bonds can deliver faster settlement, greater transparency, automated servicing and improved traceability in India's corporate bond market. India's corporate bond market remains relatively small compared with the size of its economy, with companies continuing to depend largely on banks for long-term funding. Policymakers and regulators have for years tried to broaden the investor base and improve liquidity in debt markets to support infrastructure and industrial growth.
Tokenisation refers to converting traditional securities into digital tokens recorded on blockchain-based systems. Regulators and financial institutions globally are exploring the technology as a way to reduce settlement times, cut costs and make financial products more accessible to a wider range of investors. Pandey said India's markets regulator was also evaluating risks linked to the technology before wider adoption, including cybersecurity and operational concerns. “This is at a pilot stage,” he said, adding that the regulator would first assess whether primary securities could be effectively traded and settled through tokenised systems.
Alongside tokenisation, the regulator is considering broader reforms aimed at invigorating the debt market. These include easing disclosure requirements for debt-only listed entities and developing bond exchange-traded funds and derivatives linked to corporate bond indices.
Market participants say tokenisation could eventually improve retail participation in India's bond market, where trading activity remains concentrated among institutional investors and highly rated issuers. India's annual corporate bond fundraising is approaching 9 trillion rupees ($105 billion), according to SEBI estimates, underscoring the growing importance of alternative financing channels as the economy expands.