India’s Emerging Tokenised Bond Market: L&T and IIFL Finance Launch Pioneer Offerings

L&T and IIFL Finance have joined India’s emerging tokenised bond market this week, following REC’s completion of the first such issuance, which raised ₹500 crore and ₹25 crore respectively.

L&T – the first corporate entity to enter this space – raised ₹500 crore on Wednesday at a coupon rate of 7.4% through bonds maturing in three years.

IIFL Finance, a non‑banking financial company, raised ₹25 crore at a 9.1% coupon via a two‑year bond.

Trust Investment Advisors Private Limited facilitated the IIFL Finance issue, marking the inaugural tokenised bond offering by a non‑PSU non‑banking financial company.

REC issued a 20‑month tokenised bond on Monday to raise ₹500 crore. Its issuance attracted bids worth ₹795 crore and was priced consistent with rates on its existing bonds in the market, although a dedicated trading mechanism for tokenised bonds has not yet been established.

Analysts gauge the sizable bid size as evidence of growing investor enthusiasm during this early phase of the rollout, which employs the Reserve Bank of India’s central bank digital currency (RBI CBDC) for settlement and maintains holdings on Sebi’s Demat 2.0 platform in place of traditional depositary ledgers.

Tokenised bonds leverage blockchain technology for issuance, trading, and settlement, delivering advantages such as faster processing and improved settlement efficiency.

Under the current framework, private placements and allotments continue under the existing electronic book process. Post‑allocation, bonds reside in Demat 2.0, an expansion of the traditional demat system, while payouts flow through investors’ CBDC wallets linked to their banking accounts. Participants emphasize that investors avoid opening separate demat accounts, bypass repeated know‑your‑customer requirements, and benefit from automatic coupon and redemption processing via smart contracts.

With three issuers having validated the framework so far, the focus now shifts to determining whether it can scale beyond today’s participant base.

Market observers note that establishing sufficient liquidity, providing mechanisms for secondary trading, and facilitating transfers between conventional demat accounts and Demat 2.0 will be essential before tokenised bonds transition from pilots to broader deployment. The initiative aims to reduce settlement reconciliation lag—while also addressing heightened concerns around cybersecurity, operational resilience, and interoperability as adoption expands.

• REC Ltd raised ₹500 crore via a 20-month tokenised bond at 7.3 per cent
• Larsen & Toubro raised ₹500 crore via a three-year bond at 7.4 per cent
• IIFL Finance raised ₹25 crore via a two-year bond at 9.1 per cent
• Settlement via RBI’s CBDC, with holdings recorded on Sebi’s Demat 2.0 platform instead of the conventional depository ledger
• Tokenised bonds use blockchain technology for issuance, trading and settlement

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