Sebi Plans Corporate Bond Tokenisation Pilot Using DLT

The Securities and Exchange Board of India (SEBI) is exploring a pilot project for tokenisation of corporate bonds through distributed ledger technology (DLT), Chairman Tuhin Kanta Pandey said on Tuesday.

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Speaking at the CareEdge Debt Market Summit, Pandey said the pilot project could be rolled out within the next six to nine months.

According to the SEBI chairman, the initiative will evaluate whether tokenisation can support faster settlements, improve transaction traceability, automate servicing processes and enhance transparency in the corporate bond market.

Pandey said depositories are already using distributed ledger technology for governance, management, and monitoring functions, and the regulator is now examining whether the technology can also be applied to corporate bond issuance and settlement.

He added that tokenisation could enable near-instantaneous settlement while improving liquidity and operational efficiency in debt markets.

Sebi Reviewing Risks And Operational Framework

Pandey said SEBI is also evaluating the risks associated with tokenisation before introducing the framework on a wider scale.

The regulator plans to consult market participants and develop a technology and operational model after incorporating feedback from stakeholders.

He noted that SEBI is simultaneously working on the development of corporate bond index derivatives and could launch them after the Reserve Bank of India approves draft guidelines issued earlier this year.

The market regulator is also coordinating with the RBI, the Ministry of Finance and other stakeholders on implementing the Union Budget proposal related to a market-making framework for corporate bonds.

Focus On Improving Debt Market Liquidity

SEBI is additionally working on expanding bond exchange-traded funds (ETFs) and derivatives linked to corporate bond indices to improve liquidity and broaden retail participation in debt markets.

Pandey said these measures could help retail investors access debt products with smaller investment sizes while allowing institutional investors to hedge interest rate risks more efficiently.

The regulator is also considering a separate regulatory classification for debt brokers aimed at reducing compliance costs and lowering entry barriers in the debt segment.

SEBI may also review whether companies with only listed debt securities should be subject to the same disclosure and compliance requirements under listing regulations as equity-listed firms.

Corporate Bond Market Remains Narrow

Pandey said India’s corporate bond market continues to face concentration risks, with limited participation from issuers and investors. According to him, only 776 companies out of nearly 6,000 listed firms currently have listed debt securities.

He also noted that low secondary market trading volumes continue to affect price discovery and investor participation, as a large portion of the market remains dominated by buy-and-hold investors.

On global market valuations, Pandey said investor interest in artificial intelligence-related companies and semiconductor businesses has led to higher market valuations in regions such as Taiwan, where a few technology-focused firms dominate market capitalisation.