Sebi plans revamp of securities lending, pilot of tokenisation of corp bonds
New Delhi: Markets regulator Sebi is planning to revamp securities lending and borrowing framework and undertake a pilot project on tokenisation of corporate bonds using distributed ledger technology as part of its agenda for 2026-27 and beyond.
Outlining the regulator’s roadmap in Sebi’s annual report, Chairman Tuhin Kanta Pandey said the regulator will continue to focus on removing regulatory redundancies, simplifying procedural requirements and leveraging technology to ease the compliance burden.
“The Securities Lending and Borrowing scheme needs revamping to improve price discovery and facilitate interlinkage between cash and derivatives segments,” Pandey said. The framework for short selling, introduced in 2007, has largely remained unchanged since its inception.
Similarly, the Securities Lending and Borrowing (SLB) mechanism, rolled out in 2008 and modified a few times since, remains underdeveloped compared with global markets, underscoring the need for a comprehensive reassessment.
Under the SLB mechanism, investors or institutions holding shares in their demat accounts can lend them to other market participants for a fee. The transaction is executed through the stock exchange platform, with the clearing corporation providing a counter-guarantee to ensure smooth and secure settlement. Experts noted that borrowers typically use these securities for short-selling or to avoid settlement failures.
As part of its technology initiatives, Sebi is planning a pilot project on tokenisation of corporate bonds to evaluate the feasibility of using Distributed Ledger Technology (DLT) for securities. The project will assess potential benefits such as faster settlement, operational efficiencies, programmability through smart contracts and integration with central bank digital currency (CBDC)-based settlement mechanisms.
In May, Pandey had said Sebi was exploring a pilot to assess whether tokenisation could enable faster settlement, better traceability, automated servicing and greater transparency.