India’s first Tokenized Corporate Bond

Why is in news?

The National Stock Exchange of India (NSE) has enabled tokenised corporate bond issuances worth a combined Rs 1,000 crore.

Objectives

• The transactions were conducted under the Securities and Exchange Board of India’s (SEBI) Regulatory Sandbox Framework with guidance and support from the Reserve Bank of India (RBI).
• The transactions mark an early application of tokenisation in India’s regulated corporate bond market.
• The issuance saw participation from banks, financial institutions, mutual funds and depositories.
• Tokenisation enables securities to be represented and managed digitally using Distributed Ledger Technology (DLT).
• The technology allows digital records of securities to be maintained across a distributed network, with NSE positioning it as a tool for improving processes across the securities lifecycle.
• The technology is designed to facilitate atomic settlement, improve transparency and enhance operational efficiency across the securities lifecycle.
• The system also uses India’s existing digital settlement infrastructure, rather than requiring a separate settlement framework.
• The framework provided the regulatory setting for testing the tokenisation technology within India’s existing capital-market infrastructure.

About

• Corporate bonds in India are fixed-income debt instruments issued by public and private companies, banks, and financial institutions to raise capital for operations, expansion, or refinancing.
• When you buy a corporate bond, you are essentially lending money to the company.
• In return, the company promises to pay you a fixed (or floating) interest rate called the coupon at specified intervals (monthly, quarterly, half-yearly, or annually), and to return your principal (face value) at maturity.
• Unlike buying shares (equity), buying bonds does NOT give you ownership in the company.
• Bond investors are creditors they have a prior claim on the company’s assets compared to equity shareholders in the event of liquidation.
• In India, corporate bonds are also widely known as Non-Convertible Debentures (NCDs) when issued to the public, or commercial paper and bonds in the institutional market.
• They are regulated by SEBI (Securities and Exchange Board of India) for listed securities.

Reference

Business World | India’s first Tokenised Corporate Bond