SEBI is internally exploring the formation of a working group to study tokenisation of bonds using blockchain or distributed ledger technology infrastructure, according to sources familiar with the discussions, in what could become one of the regulator's most ambitious attempts yet to deepen India's retail debt markets.
The proposed panel is likely to comprise technology experts, debt market participants, market infrastructure institutions and regulatory stakeholders to evaluate the feasibility of building tokenised debt market rails in India. The exercise is aimed at improving retail participation, liquidity and accessibility in India's corporate bond markets, which remain significantly underpenetrated compared to equity markets.
People familiar with the matter said the broader objective is also to expand debt market penetration into tier 2 and tier 3 markets by lowering investment barriers and building wider digital distribution networks for bond products.
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SEBI is studying mechanisms through which corporate bonds can be fractionally owned through tokenisation structures. Under the proposed framework, the underlying bond may continue to be held through a custodian or SPV structure, while investors hold digital tokens representing beneficial ownership of the instrument.
SEBI did not immediately respond to a request for comment.
A key idea under evaluation is reducing the effective entry barrier for bond investing. Currently, several debt instruments carry face values ranging from ₹1,000 to ₹10,000 or higher, limiting broader retail participation. Tokenisation could potentially reduce investment entry points to as low as ₹100 or even ₹1 in certain structures, sources said.
The regulator is also evaluating whether blockchain infrastructure can improve secondary market liquidity and price discovery in corporate bonds, long considered structural weaknesses in India's debt markets. Discussions are understood to include token-based fractional ownership models, blockchain-enabled settlement systems, smart contract-based automated coupon payouts, real-time or near real-time settlements and integration with online distribution platforms.
SEBI Chairman had recently said the regulator is already running a pilot around tokenisation of corporate bonds, while flagging concerns around regulatory oversight, cybersecurity safeguards and investor protection frameworks. People aware of the discussions said retail investor protection remains a central consideration as the regulator evaluates the framework.
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The move is also linked to SEBI's broader push to build a parallel ecosystem for debt market distribution and intermediation beyond traditional equity brokerage structures. Market participants said the regulator is evaluating how fintech platforms and digital distribution networks could eventually integrate into such a framework to expand household participation in debt products.
At the same time, concerns around cyber resilience, technological preparedness and regulatory safeguards are also part of the discussions. Some market participants cautioned that tokenisation frameworks would require robust oversight architecture, particularly if disclosure and onboarding norms are simultaneously eased to widen participation.
India's corporate bond markets remain heavily institution-driven, with household participation estimated at around 1%, significantly below equity market penetration.
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