{"id":120264,"date":"2026-08-21T11:05:53","date_gmt":"2026-08-21T05:35:53","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=120264"},"modified":"2026-08-21T11:34:04","modified_gmt":"2026-08-21T06:04:04","slug":"sebi-bond-tokenisation-pilot-transforming-indias-bond-market","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/sebi-bond-tokenisation-pilot-transforming-indias-bond-market\/","title":{"rendered":"SEBI Bond Tokenisation Pilot: Transforming India&#8217;s Bond Market and FPI Onboarding"},"content":{"rendered":"<h2><b>SEBI Bond Tokenisation Pilot Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The <\/span><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/securities-and-exchange-board-of-india-sebi\/\" target=\"_blank\"><span style=\"font-weight: 400;\">Securities and Exchange Board of India (SEBI)<\/span><\/a><span style=\"font-weight: 400;\"> has announced plans to launch a pilot for bond tokenisation, alongside easing the onboarding process for <\/span><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/foreign-portfolio-investment-fpi\/\" target=\"_blank\"><span style=\"font-weight: 400;\">Foreign Portfolio Investors (FPIs)<\/span><\/a><span style=\"font-weight: 400;\"> through a digitally signed Power of Attorney.<\/span><\/li>\n<\/ul>\n<h2><b>What Is Bond Tokenisation?<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Bond tokenisation converts a traditional bond into digital tokens on a <\/span><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/blockchain-technology\/\" target=\"_blank\"><span style=\"font-weight: 400;\">blockchain<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Each token represents partial ownership of the bond, giving investors the same returns \u2014 interest payments and principal repayment \u2014 but at much smaller ticket sizes.<\/span><\/li>\n<\/ul>\n<h3><b>How It Differs from Traditional Bond Investing<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Traditional bonds pass through multiple intermediaries for issuance, settlement, and custody.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Tokenised bonds can be issued, traded, and settled digitally with <\/span><b>fewer intermediaries<\/b><span style=\"font-weight: 400;\">, backed by a <\/span><b>real-time verifiable transaction record<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Accessibility for retail investors<\/b><span style=\"font-weight: 400;\">: Corporate bonds have traditionally been an institutional product requiring large capital. Fractional ownership through tokenisation removes this barrier, opening fixed income to everyday investors.<\/span><\/li>\n<\/ul>\n<h3><b>Key Benefits<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Faster Settlement<\/b><span style=\"font-weight: 400;\"> &#8211; Corporate bonds currently settle on a <strong><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/trade-to-trade-t2t-segment-in-stock-markets\/\" target=\"_blank\">T+2 cycle<\/a> <\/strong>(two days after the transaction). On blockchain, settlement can happen in real time, freeing up capital faster and reducing counterparty risk during the trade-to-settlement window.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Greater Transparency<\/b><span style=\"font-weight: 400;\"> &#8211; Every transaction on a distributed ledger is recorded and immutable, giving investors full visibility into ownership history, coupon payments, and redemptions without depending on intermediaries for accurate record-keeping.<\/span><\/li>\n<\/ul>\n<h3><b>Key Risks and Concerns<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Cryptographic vulnerability:<\/b><span style=\"font-weight: 400;\"> SEBI has flagged concerns that future quantum computers could potentially break the cryptographic algorithms securing blockchain systems, risking the integrity of the entire record.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Interoperability challenges:<\/b><span style=\"font-weight: 400;\"> Integration between legacy depository systems and new blockchain infrastructure remains untested at scale.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Regulatory gaps:<\/b><span style=\"font-weight: 400;\"> India currently lacks a comprehensive legal framework defining ownership rights, dispute resolution, and investor protection for tokenised bonds \u2014 a gap that is likely to keep institutional participation limited until addressed.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Liquidity constraints:<\/b><span style=\"font-weight: 400;\"> In the early pilot phase, secondary market depth is expected to be limited, meaning entry may be easier than exit for investors.<\/span><\/li>\n<\/ul>\n<h2><b>SEBI&#8217;s Bond Tokenisation Plan<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SEBI plans to launch the pilot &#8220;in the near future,&#8221; in coordination with the Reserve Bank of India (RBI), to improve accessibility, transparency, and efficiency in the bond market.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The core idea is to test whether a shared ledger can enable simultaneous transfer of the security and money, making settlement more efficient and reducing reconciliation costs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The pilot will also examine the feasibility of automated coupon payments and other bond-servicing events through smart contracts.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The move comes as SEBI pushes to deepen the bond market to channel more capital toward economic growth.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It aligns with the regulator&#8217;s broader push to modernise debt market infrastructure using technology.<\/span><\/li>\n<\/ul>\n<h2><b>Credit Risk-o-Meter for Investor Protection<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SEBI is also consulting on introducing a &#8220;<\/span><b>Credit Risk-o-Meter<\/b><span style=\"font-weight: 400;\">&#8221; for debt securities to strengthen investor protection in a market that has been gaining traction.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It will be a standardised, colour-coded visual scale mapped to existing credit-rating symbols.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It will be displayed both in the offer document and on platforms selling the securities, along with the credit rating and the name of the credit-rating agency.<\/span><\/li>\n<\/ul>\n<h2><b>Framework for Fixed Income Channel Partners<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SEBI will &#8220;shortly&#8221; introduce a framework for <\/span><b>fixed income channel partners<\/b><span style=\"font-weight: 400;\">, similar to mutual fund distributors, to improve distribution of the corporate bond market.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These partners will be certified through the National Institute of Securities Markets (NISM).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Importantly, channel partners will not handle client funds or securities, nor charge investors separately \u2014 the goal being to expand market reach while maintaining accountability and investor safeguards.<\/span><\/li>\n<\/ul>\n<h2><b>Easing FPI Onboarding: Digital Power of Attorney<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In a separate move effective immediately, SEBI now allows FPIs to submit a digitally signed Power of Attorney (PoA) to their custodians.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A PoA authorises custodians \u2014 SEBI-registered institutions responsible for holding and managing FPI investments \u2014 to act on the FPI&#8217;s behalf.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This eliminates the need for notarisation, apostillisation, or consularisation of the PoA, significantly reducing onboarding time and improving ease of doing business.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This builds on earlier SEBI measures, such as a common application form for FPI registration, aimed at simplifying compliance for foreign investors.<\/span><\/li>\n<\/ul>\n<h2><b>Conclusion<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SEBI&#8217;s twin initiatives \u2014 piloting blockchain-based bond tokenisation and simplifying FPI onboarding \u2014 reflect its dual focus on deepening India&#8217;s debt market through technology while making the market more accessible to foreign capital.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Together with the proposed Risk-o-Meter and channel partner framework, these steps aim to build a more efficient, transparent, and investor-friendly bond market ecosystem.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/indianexpress.com\/article\/business\/market\/sebi-to-launch-pilot-for-bond-tokenisation-ease-fpi-onboarding-process-10842176\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/www.livemint.com\/money\/personal-finance\/bond-tokenisation-explained-how-it-works-and-what-are-the-benefits-and-risks-11780069519983.html\" target=\"_blank\" rel=\"nofollow noopener\">LM<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SEBI Bond Tokenisation Pilot aims to improve bond market accessibility and efficiency while digital reforms simplify FPI onboarding and strengthen investor protection.<\/p>\n","protected":false},"author":18,"featured_media":120288,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,9678,22,59],"class_list":["post-120264","post","type-post","status-publish","format-standard","has-post-thumbnail","category-upsc-mains-current-affairs","tag-mains-articles","tag-sebi-bond-tokenisation-pilot","tag-upsc-current-affairs","tag-upsc-mains-current-affairs-tag","no-featured-image-padding"],"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/120264","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=120264"}],"version-history":[{"count":4,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/120264\/revisions"}],"predecessor-version":[{"id":120282,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/120264\/revisions\/120282"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/120288"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=120264"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=120264"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=120264"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}