RBI Pilots Tokenised Deposits: Blockchain Rails Enter India’s Banking Core

New Delhi, 08 October 2025 — In a bold foray into the future of banking, the Reserve Bank of India (RBI) today launched a controlled pilot to convert conventional bank deposits into digital tokens, settling them over a shared distributed ledger built atop the wholesale Central Bank Digital Currency (CBDC) infrastructure. The move, though incremental in the retail domain, is being watched as a signal of India’s readiness to architect programmable finance at scale.

The tokenisation experiment is strictly interbank in scope for now: participating commercial banks will issue tokenised claims corresponding to actual deposits held on their books. These tokens, tied to on-balance sheet liabilities, will circulate for settlement among banks, enabling potentially faster transfers, simpler reconciliation, and reduced counterparty risk. Importantly, depositors will see no change in their accounts or balances in the near term — the novelty lies behind the scenes.

Analysts believe this is a decisive step in modernising India’s banking rails. Though UPI and other payment systems have already transformed retail payments, back-office frictions remain a constraint. If successful, tokenised deposits could reshape settlement flows for securities, embedded financial products, intraday liquidity, and more. But for now, RBI will closely monitor finality, privacy safeguards, interoperability and risk controls before any scaled rollout.

🧩 Anatomy of the Pilot: Features, Design, and Scope

What Are Tokenised Deposits?

Tokenised deposits refer to digital assets on a ledger representing a claim on conventional deposit liabilities held at banks. Unlike cryptocurrencies, they are fully backed — each token corresponds 1:1 to a real deposit. The key difference lies in the mode of settlement: rather than messages passed through legacy clearing systems, these tokens move (and settle) across a distributed or shared ledger, with the potential for atomic settlement, simpler reconciliation, and reduced delays.

In this RBI pilot, tokenised deposits remain strictly bank liabilities — they are not retail CBDC where the central bank directly bears the liability to end users. Rather, banks continue to owe the depositors; the tokens help banks trade interbank claims more fluidly.

Why Use the Wholesale CBDC Layer?

The RBI is anchoring the tokenisation experiment on its already existing wholesale CBDC infrastructure. This is a smart design choice for multiple reasons:

Strong settlement finality: Since wholesale CBDC is central bank money, settlement is anchored in a safe, robust core.
Interoperability: Tokenised deposits can interface with existing systems if built over a shared core governed by RBI.
Controlled scope: The wholesale layer is inherently for institutional flows, making it a suitable sandbox for interbank innovation.
Incremental approach: It avoids upending customer-facing systems all at once — risks are constrained to the interbank sphere.

RBI’s Chief General Manager Suvendu Pati revealed that the pilot would engage a select set of banks, with tokens issued and settled in this closed sandbox environment.

What the Pilot Will Test

Over the course of this controlled experiment, RBI and the participating banks plan to explore a number of parameters:

Settlement finality and atomicity — ensuring once a tokenised transfer is made, it is irreversible and provably settled.
Reconciliation efficiency and latency — measuring how quickly interbank books reconcile without legacy back-office frictions.
Privacy and data partitioning — ensuring that token movements respect confidentiality and regulatory norms.
Interoperability with legacy rails — the token ledger must coexist with RTGS, NEFT, internal bank systems.
Risk controls and contingency fallbacks — how to manage defaults, exceptions, rollbacks, or system outages.
Scalability — whether the ledger can handle high throughput and real-world volumes.

RBI has stated that risks in asset tokenisation are manageable if guardrails of integrity and enforceability are assured.

What Is Not Part of It — For Now

This is not a retail CBDC or direct tokenisation for end-users — customers do not hold or see tokens.
It does not yet cover money market instruments, securities settlement, or cross-border flows — though RBI is reportedly evaluating experiments in instruments like commercial paper (CPs) in future phases.
The pilot is not fully public-facing; it remains a permissioned setup with governance oversight by RBI.

🔍 Strategic Role & Rationale: Why India Is Taking This Path

Addressing Back-Office Friction in Banking

While India’s payments landscape is often hailed as world-class (thanks to UPI, automatic clearing, immediate payments), the world behind the scenes is not always frictionless. Batch reconciliations, legacy message flows, delayed settlement windows and manual interventions remain persistent sources of inefficiency.

Tokenised deposits promise to reduce these bottlenecks by enabling real-time, atomic settlement of interbank claims, eliminating the need for multiple messaging hops and reconciliation windows.

Enabling Programmability & Embedded Finance

One of the transformative promises of tokenisation is programmability — the ability to embed conditions, triggers or business logic into token movement. In future, this might allow:

Atomic Delivery vs Payment (DvP) workflows for securities: a tokenised bond or equity trade could settle simultaneously with payment tokens.
Intraday liquidity optimization: tokens might be prefunded or rebalanced dynamically to minimize idle capital.
Conditional transfers: e.g., funds released only when certain conditions are met (time, external events).
Embedded finance: seamless, condition-triggered transfer flows across banking, investment or supply chain platforms.

This is not science fiction — jurisdictions globally are piloting these ideas in capital markets. India’s ambition is to extend that to core banking.

Regulatory Embrace & Risk Containment

A critical advantage of RBI’s choice to make these deposits still bank liabilities is regulatory continuity: existing prudential norms, capital, liquidity, and supervisory oversight remain valid. The experiment is not rewriting risk architecture but improving infrastructure.

By limiting exposure initially to interbank settlement, RBI ensures that consumer protection, deposit insurance, compliance and oversight mechanisms are not disrupted prematurely.

Resilience & Future-Proofing the Banking Stack

As financial systems evolve, resilience is paramount. Tokenised rails can provide alternative settlement paths, greater auditability, cryptographic proofs, and more modular architecture. This can help India’s banking system adapt to digital innovation, scale demands, and global connectivity in future decades.

🧭 Implementation Roadmap, Challenges & Risks

Phased Development

Pilot / sandbox phase (current): interbank tokenised claims among participating banks.
Expanded institutional rollouts: include securities markets, money market instruments, conditional contracts.
Selective retail experiments: possibly in controlled settings (eg, corporate clients or fintech partners) before general public adoption.
Full integration: interoperability with legacy rails, cross-border linkages, embedded finance adoption.

Technical and Governance Hurdles

Scalability & throughput: The ledger must sustain volumes comparable to RTGS/NEFT peaks.
Latency & performance: Delays must not undermine competitive banking speeds.
Fallback mechanisms: In case of ledger outages, rollback or compensation paths must exist.
Data privacy & confidentiality: Token flows must be auditable yet shield sensitive bank/balance information.
Legal enforceability: Tokens must carry legal claim enforceability (e.g., in bankruptcy or default).
Integration complexity: Legacy core banking systems, interbank switches, and reconciliation systems may need substantial changes.
Counterparty or settlement risk: Clear rules needed around disputes, settlement failure, rollbacks.
Regulatory oversight & auditability: The system must ensure compliance, audit logs, and forensic capabilities.

Operational & Institutional Risks

Bank readiness & cost: Participating banks may need to revamp systems and train teams.
Interoperability mismatch: Legacy systems might not mesh cleanly with tokenised flows.
Unintended fragmentation: If multiple token ledgers or standards proliferate, interoperability breaks down.
Cybersecurity & attack surface: Distributed systems introduce new vectors for fraud, hacking, or cryptographic faults.
Regulatory ambiguity: New norms may need law amendments, central bank powers, dispute resolution mechanisms.

🧾 Strategic Implications & What It Could Unlock

Deepening Digital Finance in India

India already leads in retail digital payments via UPI. But its banking rails and capital markets are still often chained to legacy stacks. A successful tokenisation rollout could accelerate modernization across sectors.

Bridge to Capital Markets & Securities Settlement

One of the most anticipated outcomes is tokenisation enabling atomic DvP workflows: trades in securities could settle simultaneously with payments, eliminating counterparty or settlement risk windows.

India’s robust capital markets could leapfrog global benchmarks if tokenised rails serve as a unified plumbing layer across banking, trading, custody and settlement.

Enabling Embedded & Real-Time Finance

With tokenised rails, financial flows can become composable. Supply chain payments, escrowed settlement, contingent pay-outs, insurance triggers, micropayments, and more could embed seamlessly. Finance becomes an API layer, not an afterthought.

Global Interoperability & Cross-Border Flows

Over time, tokenised rails might interface with cross-border CBDC systems, enabling frictionless settlement between India and foreign central bank platforms or token networks. India could position itself as a hub in future multi-CBDC corridors.

Competitive Leadership & Soft Power

This move reiterates India’s ambition to be a leader in financial infrastructure innovation. It signals to global fintechs, technologists, and central banks that India is willing to test bold architectures at scale.

📌 Key Questions to Watch & Metrics to Evaluate

Focus Area	Key Metric / Indicator	What to Watch
Settlement Efficiency	Latency, throughput, reconciliation time	Does token transfer complete faster than legacy messaging?
Finality & Atomicity	Failures, reverts	Are token transfers atomic and irreversible?
Interoperability	Integration success, fallback usage	How smoothly do tokens co-exist with RTGS / NEFT?
Privacy / Audit	Data leakage, audit logs	Are token flows auditable yet confidential?
Scalability	Peak load performance	Can the system scale to many transactions per second?
Fault Tolerance	Outage resilience, rollback paths	How does system respond to ledger or node failure?
Adoption Readiness	Bank onboarding speed, system changes	How many banks volunteer or adapt quickly?
Regulatory & Legal Framework	Dispute resolution, enforceability	Are token claims legally binding and safe?