L&T and IIFL Finance Issue Tokenized Bonds in Expanding CBDC Pilot

Larsen & Toubro and IIFL Finance have entered India's emerging tokenized bond market, raising Rs 500 crore and Rs 25 crore respectively in recent private placements. The transactions follow REC's milestone debut issuance earlier in the week, marking a concerted push by major Indian corporate entities to test blockchain-based debt issuance and settlement frameworks supervised by financial authorities.

The new issuances leverage the Reserve Bank of India's central bank digital currency for payment settlement while utilizing Securities and Exchange Board of India's Demat 2.0 platform for recording holdings. Market participants note that this multi-institutional testing phase highlights growing corporate interest in streamlining debt instruments through distributed ledger technology.

Larsen & Toubro secured Rs 500 crore on Wednesday through its inaugural tokenized bond offering. The three-year debt instrument carries a coupon rate of 7.4 per cent, making the engineering conglomerate the first private-sector corporation to issue debt through the new blockchain-based architecture.

The successful placement expands the scope of the tokenized market beyond public-sector undertakings, giving private issuers direct operational experience with blockchain settlement rails. Market observers noted that corporate participation validates the technical feasibility of managing debt maturities on distributed ledgers without relying exclusively on conventional depository ledgers.

IIFL Finance raised Rs 25 crore at a coupon of 9.1 per cent through a two-year tokenized bond issuance. Arranged by Trust Investment Advisors Private Limited, the transaction marked the first time a non-public sector undertaking non-banking financial company has accessed funds via this nascent framework.

The higher yield compared to corporate peers reflects prevailing market pricing for the NBFC segment while testing whether retail-adjacent financial institutions can integrate CBDC settlement mechanics into their routine capital-raising operations. The issue successfully cleared private placement channels before migrating to the designated demat infrastructure.

REC initiated the current wave of blockchain debt offerings on Monday by issuing a 20-month bond to raise Rs 500 crore. The issuance drew robust interest, pulling in bids totaling Rs 795 crore from institutional participants.

Pricing for the REC issuance aligned closely with prevailing rates on its conventionally traded bonds in the secondary market. This pricing parity occurred despite the current absence of an active secondary trading mechanism for tokenized instruments, signaling strong baseline institutional confidence in the underlying structure.

Tokenized bonds utilize blockchain technology across the complete lifecycle covering issuance, trading, and settlement. Under the established framework, primary private placement and allotment continue through existing electronic book mechanisms before holdings transition to the Demat 2.0 platform.

Payments are executed through investors central bank digital currency wallets linked directly to their bank accounts. Market participants have pointed out that investors bypass the need to open separate demat accounts or repeat standard know-your-customer verifications, while coupon and redemption disbursements can be fully automated using smart contracts.

With three major issuers having tested the tokenized framework, industry focus has shifted to whether the market can expand beyond the initial cohort of participating investors. Market participants have highlighted that sustained liquidity remains a prerequisite for broader adoption.

Additional operational requirements include developing a functional secondary trading mechanism and establishing seamless interoperability to move holdings between conventional demat accounts and Demat 2.0. As issuance volumes grow, stakeholders emphasize that cybersecurity, operational resilience, and reconciliation protocols will require continued oversight.

Transactions are scheduled to settle securities and cash payments on the same rail to eliminate traditional reconciliation delays. Further milestone updates on secondary market liquidity frameworks and broader institutional onboarding are expected as regulatory bodies evaluate the pilot phase results.