State-owned power and infrastructure financier REC Limited has completed India’s first pilot tokenized corporate bond issue, raising ₹500 crore under the securities regulator’s Regulatory Sandbox Framework. The transaction marks a significant test of how distributed ledger technology, digital securities accounts and central bank digital currency can be combined within India’s existing regulated bond market.
The bond carries a 7.30% annual coupon and a tenor of one year and nine months. Investor demand significantly exceeded the original ₹100 crore base issue, allowing REC to exercise a ₹400 crore greenshoe option and raise the full ₹500 crore.
Key Overview
- REC raised ₹500 crore through India’s first pilot tokenized corporate bond.
- The issue had a ₹100 crore base size and ₹400 crore greenshoe option.
- Investor bids reached ₹796 crore, nearly eight times the base issue.
- The bond pays a 7.30% annual coupon and has a one-year, nine-month tenor.
- Pay-in, allotment and listing were completed on the same day.
- The pilot uses distributed ledger infrastructure alongside wholesale digital-rupee settlement.
- The bonds are listed on both the National Stock Exchange and Bombay Stock Exchange.
Strong Demand Pushes REC Issue to ₹500 Crore
REC initially targeted a base issuance of ₹100 crore, but the book attracted bids worth ₹796 crore. The company consequently exercised its ₹400 crore greenshoe option and accepted ₹500 crore at a coupon of 7.30% per annum.
The transaction was conducted through the National Stock Exchange’s Electronic Bidding Platform and involved institutional investors rather than a broad retail offering. HDFC Bank and ICICI Bank were among the institutions linked to the transaction, while roughly 20 investors including banks, mutual funds and corporates reportedly participated in the issue.
That level of demand is significant because the transaction was not simply another conventional REC fundraising exercise. Investors were participating in a pilot designed to test new infrastructure for holding and settling debt securities while operating within the established regulatory environment.
What Makes the Bond “Tokenized”?
Tokenization does not mean the REC security has become a cryptocurrency. A tokenized bond remains a conventional debt security with an issuer, coupon, maturity date and contractual repayment obligations. The main difference lies in how ownership and transactions are represented and processed.
Traditional dematerialized securities already replace paper certificates with electronic ownership records. Tokenization goes further by representing the asset or associated ownership rights on a programmable distributed ledger accessible to authorized participants.
India’s pilot introduces a new securities wallet known as Demat 2.0, developed around distributed-ledger infrastructure. Participants in the pilot also require compatible payment infrastructure, creating an environment where the securities and cash components of a transaction can interact digitally.
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Wholesale CBDC Enables Atomic Settlement
One of the most important elements of the pilot is the use of the Reserve Bank of India’s wholesale central bank digital currency for the payment side of the transaction.
The structure enables what is known as Delivery-versus-Payment, where the securities transfer and corresponding payment are linked. In an atomic transaction, one leg is completed only if the other is also completed, potentially reducing settlement and counterparty risks.
REC said the tokenized process enabled pay-in, allotment and listing on the same day. The bonds were subsequently listed on both major Indian exchanges.
The broader potential is significant. Tokenized financial infrastructure can combine messaging, reconciliation and asset transfers into more integrated processes. Research on programmable financial infrastructure has highlighted atomic settlement as a way of reducing reconciliation requirements and mitigating principal risk in securities transactions.
Pilot Could Shape India’s Digital Debt Market
The REC transaction remains an experiment rather than evidence that India’s entire corporate bond market is moving onto blockchain. Participation is currently restricted, and retail investors cannot simply purchase the instrument through normal retail bond channels.
Tokenization also does not automatically create greater liquidity. Even when settlement becomes faster, a bond still requires willing buyers and sellers, suitable market infrastructure and clear rules governing custody, ownership and secondary trading.
However, the pilot provides regulators and financial institutions with a real transaction through which these issues can be tested. Before the issuance, regulators had already been examining bond tokenization as a potential tool for improving accessibility, transparency and efficiency in India’s corporate bond market.
REC’s successful ₹500 crore transaction therefore represents more than a technological demonstration. It provides an early test of whether tokenized securities, regulated distributed ledgers and central bank digital money can work together at scale while remaining integrated with India’s established capital-market framework.
Sources
REC Limited / Ledger Insights Reuters / Business Standard / The Tribune / Moneycontrol / Securities and Exchange Board of India / Bank for International Settlements
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