SEBI Plans to Launch Pilot for Tokenised Corporate Bonds Amid Push for Debt Market Liquidity

Securities and Exchange Board of India (SEBI) on Tuesday unveiled plans to test tokenisation of corporate bonds through a pilot project using distributed ledger technology (DLT). As per news reports, the announcement was made by SEBI Chairman Tuhin Kanta Pandeyat the CareEdge Debt Market Summit. 

The regulator expects the pilot to be rolled out within 6 to 9 months. The exercise will examine whether tokenisation can support quicker settlements, improve transparency, and strengthen tracking of bond transactions. 

Regulator Looks at Debt Market Liquidity 

SEBI is also working with the Reserve Bank of India, the Ministry of Finance and market participants on measures linked to liquidity in the corporate bond market.  

Discussions are underway on a market-making framework, bond exchange-traded funds and derivatives tied to corporate bond indices. 

According to the regulator, India’s corporate bond market has expanded from around ₹17.5 lakh crore in FY15 to nearly ₹59 lakh crore. Despite the growth, trading activity in the secondary market continues to remain limited. 

Participation Remains Narrow 

The regulator noted that nearly 85-90% of bond issuances are concentrated among AA and AAA-rated issuers. Only 776 out of around 6,000 listed companies currently have listed debt securities. 

SEBI also flagged low retail participation in the bond market. A large section of investors continues to hold bonds until maturity, resulting in lower trading volumes and weaker price discovery in secondary markets. 

Under Project Jagruk, SEBI and stock exchanges plan to conduct awareness programmes focused on debt market products and listed bonds. Outreach programmes are also being planned for companies eligible to raise funds through listed debt. 

Compliance Framework Under Review 

The regulator is examining a separate classification for debt brokers to lower compliance costs and encourage specialised intermediaries in fixed-income markets.  

SEBI is also reviewing whether debt-only listed entities should continue to follow the same LODR disclosure requirements as equity-listed companies. 

Read More: SEBI Plans to Bring Back Commodity Derivatives Market Regulator! 

Conclusion 

SEBI is preparing multiple reforms for India’s corporate bond market, including a pilot for tokenised bonds and changes to debt market regulations. The proposals are currently being discussed with market participants and other financial authorities.  

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