SEBI and RBI Collaborate on Corporate Bond Tokenisation Pilot to Test Faster Settlement

The Securities and Exchange Board of India (SEBI) is moving forward with a pilot program focused on the tokenisation of corporate bonds. The initiative is being carried out in coordination with the Reserve Bank of India (RBI), with a broader project anticipated in the near future.

Speaking on the development, SEBI Whole-Time Member Amarjeet Singh explained that the tokenisation pilot will examine whether shared data can enable the simultaneous transfer of securities. The approach is designed to make settlement more efficient and reduce overall reconciliation costs.

Additionally, the pilot will evaluate the feasibility of automated coupon payments and other servicing events through smart contracts. Singh emphasized that the initiative is not aimed at creating a separate trading market, but rather at testing whether technology can simplify and accelerate the existing bond market.

In parallel, the regulator is looking to deepen the corporate bond repo market. Currently, daily volumes stand at approximately ₹6,000 crore, accounting for less than one percent of overall repo volumes. SEBI is engaging with relevant authorities to address issues that extend beyond its direct remit.

To address liquidity challenges in the secondary market, SEBI is working on a formal market-making framework as proposed in the Union Budget 2026-27. The market currently faces fragmentation, with nearly 33,000 outstanding instruments distributed across 7,200 issuers.

To counter this fragmentation, SEBI is examining ways to concentrate issuers into fewer benchmark issues. Measures under consideration include issuer buybacks, liquidity support arrangements, and further development of the Request for Quote (RFQ) platform.

SEBI is also working on a distribution framework to broaden access to corporate bonds. This framework would allow online bond platform providers (OBPPs) to appoint certified channel partners, alongside participation from existing mutual fund distributors. A consultation paper on this framework is expected to be issued soon.

Under the proposed framework, channel partners would be certified through the National Institute of Securities Markets. They would not handle bank funds or securities, nor would they charge investors separately. Singh noted that building a responsible distribution architecture is essential for broadening participation.

Furthermore, SEBI is developing risk disclosure measures, which include a graded risk-o-meter for bonds. These collective efforts are intended to make the corporate bond market deeper, more liquid, diversified, accessible, and trusted.

"The collaborative pilot between SEBI and RBI on bond tokenisation marks a pragmatic step toward modernising financial market infrastructure. By testing smart contracts for simultaneous settlements and automated coupon servicing, regulators are addressing core inefficiencies like reconciliation costs and settlement delays. For businesses, fintech platforms, and market participants, these technological enhancements and broader distribution frameworks will eventually create a more accessible, liquid, and transparent corporate bond ecosystem." — Dr. Shishir Gupta, Founder & CEO, StartupLanes