India’s financial markets are taking another significant step towards blockchain-powered infrastructure. Larsen & Toubro (L&T), one of India’s leading engineering and technology conglomerates, has become the first private-sector corporate in India to raise funds through tokenised bonds under the country’s emerging blockchain-based securities framework.
L&T raised ₹500 crore through tokenised corporate bonds with a three-year tenure, demonstrating how Distributed Ledger Technology (DLT) can be integrated with traditional debt-market instruments.
The development is particularly significant because tokenisation is moving beyond cryptocurrency and into regulated financial markets. With regulators and financial institutions exploring blockchain-based infrastructure, tokenised bonds could play an important role in the future digitalisation of India’s capital markets.
What Is L&T’s Tokenised Bond Issue?
L&T raised ₹500 crore through a three-year tokenised bond issue under the new framework being tested for India’s corporate bond market.
The transaction uses Distributed Ledger Technology (DLT) to digitally represent and record the bonds. Instead of replacing the underlying financial instrument, tokenisation introduces a new technological infrastructure for recording ownership and processing transactions.
Reports indicate that L&T’s three-year bonds were issued at a 7.40% coupon rate.
Importantly, a tokenised corporate bond remains a corporate bond from a legal and financial perspective. The issuer’s repayment obligations and investors’ rights continue to apply. Existing requirements involving areas such as credit ratings, disclosures, listing and debenture trustees also remain applicable.
What Are Tokenised Bonds?
A tokenised bond is a conventional debt security whose ownership is digitally represented and recorded using blockchain or Distributed Ledger Technology.
In a traditional corporate bond, a company raises money from investors and agrees to pay interest while returning the principal according to the bond’s terms.
Tokenisation does not fundamentally change this relationship.
Instead, blockchain-based infrastructure can create a digital representation of the security and maintain transaction records on a shared ledger accessible to authorised participants.
This could potentially make bond issuance, ownership records, settlement and servicing more efficient.
How Does India’s Demat 2.0 Framework Work?
India’s experiment with tokenised corporate bonds is being developed through Demat 2.0, a pilot initiative involving the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI).
The framework combines two major technologies:
Distributed Ledger Technology (DLT) for creating and recording tokenised securities, and the RBI’s wholesale Central Bank Digital Currency (CBDC) for the payment side of transactions.
This combination can enable what is known as atomic settlement.
Atomic settlement means the transfer of the security and the corresponding payment can occur together. This can reduce the risks and reconciliation requirements associated with securities and funds moving through separate processes.
The framework is designed to test issuance, holding, settlement and, in later stages, secondary-market trading of tokenised corporate bonds.
L&T Is Part of a Larger Tokenisation Pilot
Although L&T is the first private-sector corporate to complete such an issuance, it was not the first issuer under the initiative.
REC became the first issuer under the pilot, raising ₹500 crore through a tokenised bond. L&T subsequently raised another ₹500 crore, while IIFL Finance raised ₹25 crore.
Together, the first three issuers raised approximately ₹1,025 crore through tokenised corporate bonds.
These early transactions provide regulators and financial institutions with an opportunity to evaluate how blockchain-based securities infrastructure performs in real capital-market conditions.
Why Is L&T’s Tokenised Bond Important?
L&T’s participation is important because it demonstrates that blockchain technology can have applications far beyond crypto assets.
For years, blockchain has been associated primarily with Bitcoin, cryptocurrencies and decentralised finance. Tokenised bonds demonstrate another use case: modernising the infrastructure supporting conventional regulated financial assets.
Potential benefits of tokenisation include faster settlement, improved transparency, more efficient record-keeping and reduced operational reconciliation.
Smart contracts could also eventually automate certain bond-servicing processes, including interest payments and redemption.
For issuers, greater automation may improve operational efficiency. For investors, transparent digital records and more efficient settlement infrastructure could improve the overall market experience.
Can Tokenisation Improve India’s Corporate Bond Market?
India has a large and developing corporate debt market, but challenges such as secondary-market liquidity and participation remain important considerations.
Tokenisation alone cannot solve every problem in the bond market. A digital bond can still carry credit risk, interest-rate risk and liquidity risk.
However, the technology could improve the infrastructure through which bonds are issued, recorded, transferred and settled.
SEBI’s pilot is expected to develop in phases. The initial stage focuses primarily on institutional issuance, while later stages are expected to test secondary-market transfers and potentially wider investor participation.
Existing demat infrastructure also remains important. Under the pilot framework, investors can hold the securities through their existing demat accounts rather than needing an entirely separate investment identity or fresh KYC process.
What Does This Mean for Blockchain Adoption in India?
L&T’s ₹500 crore tokenised bond highlights a broader transition taking place in financial technology.
Blockchain is increasingly being evaluated as financial-market infrastructure, rather than only as technology supporting cryptocurrencies.
Combining tokenised securities with the RBI’s digital rupee could eventually create an ecosystem in which both the asset and payment sides of financial transactions operate digitally and with greater automation.
However, widespread adoption will depend on factors including regulation, cybersecurity, interoperability, operational resilience and the development of sufficient secondary-market liquidity.
Conclusion
L&T’s entry into India’s tokenised bond market represents an important milestone in the digital evolution of the country’s capital markets.
The ₹500 crore issuance shows how blockchain-based infrastructure can work alongside established corporate debt instruments without changing the fundamental rights and obligations associated with the bond.
India’s tokenised bond market is still in its early stages, and challenges around liquidity, interoperability and market adoption remain. Nevertheless, the combination of DLT, tokenised securities and CBDC-based settlement provides a significant real-world test of how blockchain technology could reshape financial-market infrastructure.
If the Demat 2.0 pilot successfully expands into secondary trading and broader investor participation, L&T’s transaction may be remembered as one of the early milestones in India’s transition towards more digitally integrated capital markets.
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Frequently Asked Questions
What is a tokenised bond?
A tokenised bond is a conventional bond represented digitally using blockchain or Distributed Ledger Technology. The underlying debt obligation remains intact while ownership and transactions can be recorded digitally.
How much did L&T raise through tokenised bonds?
L&T raised ₹500 crore through its first tokenised corporate bond issuance.
What is the maturity of L&T’s tokenised bond?
The bonds have a three-year tenure.
Is L&T the first company to issue a tokenised bond in India?
L&T is the first private-sector corporate to issue a tokenised bond under the new framework. REC was the first issuer under India’s Demat 2.0 tokenised corporate bond pilot.
What technology is used for tokenised bonds in India?
The framework uses Distributed Ledger Technology (DLT) for tokenised securities and integrates with the RBI’s wholesale Central Bank Digital Currency (CBDC) infrastructure for settlement.