India issues first tokenized corporate bond

REC Ltd. raised 5 billion rupees ($53 million) on September 7 in what Indian market participants described as the country’s first pilot issue of tokenized corporate bonds, using the Reserve Bank of India’s wholesale central bank digital currency for settlement. Business Standard reported the state-run power financier completed pay-in, allotment and listing on the same day under the Securities and Exchange Board of India’s regulatory sandbox. Reuters had reported on August 24 that REC would be the first issuer in the test and that the offering would be limited to a select group of investors. A tokenized bond is still a conventional corporate bond, but its ownership and transaction records are represented digitally on a programmable ledger rather than only through existing market plumbing, Business Standard reported. The RBI says its wholesale CBDC pilot is designed for restricted access by banks and other institutions, distinguishing it from the retail digital rupee available to the public. (business-standard.com) ### Who issued the bond, and on what terms? REC, a Maharatna state-owned non-bank financier under India’s Ministry of Power, issued the notes with a tenor of one year and nine months, according to Business Standard and REC’s corporate materials. The bond carried a 7.30% coupon and attracted bids worth 7.96 billion rupees against the 5 billion rupees on offer, Business Standard reported on September 8. (business-standard.com) Reuters reported before the sale that the issue size would be less than 5 billion rupees and that the transaction was being prepared jointly with India’s central bank and market regulator. That report said the bonds would be bought using India’s central bank digital currency and offered only to a selected group at the pilot stage. (business-standard.com) ### What made this different from an ordinary bond sale? SEBI Chairman Tuhin Kanta Pandey said in May that the regulator planned a pilot for tokenized corporate bonds using distributed ledger technology and wanted to test “faster settlement, better traceability, automated servicing, and greater transparency.” He said the pilot could be implemented within six to nine months. (business-standard.com) Business Standard reported that the REC issue linked the payment leg in digital rupees with the digital representation of the bond on tokenized securities infrastructure, allowing what market participants call atomic settlement. In that model, the bond and cash move together in a single transaction rather than through the conventional multi-step process. (business-standard.com) ### Did the trade settle on a public blockchain? Business Standard reported that the infrastructure can use distributed ledger technology without relying on a public blockchain. In regulated markets, the ledger can run on a permissioned network in which only authorized participants can transact, the report said. (business-standard.com) The RBI’s April 29 FAQ says the wholesale digital rupee pilot is meant for financial institutions, while retail e-rupee wallets are offered by participating banks and non-banks to consumers and merchants. That framework is why the REC transaction was described as an institutional pilot rather than a public crypto-style issuance. ### Which institutions were involved? (business-standard.com) Reuters said on August 24 that the names of investors had not been confirmed at that stage. Subsequent market reports named domestic banks and intermediaries among participants, but the clearest verified public details from primary reporting remain REC as issuer, SEBI’s sandbox as the framework, and the RBI wholesale CBDC as the settlement rail. (rbi.org.in) ### What comes next in India’s bond-tokenization test? May 26 set the timetable when Pandey said SEBI expected a tokenization pilot within six to nine months. September 7 delivered that first REC transaction, and the next public markers are likely to come through exchange filings, regulator updates and any further pilot issues by Indian issuers using the same sandbox framework. (business-standard.com 1) (business-standard.com 2)