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1. Tokenized Deposits and the Digital Rupee: Comparing Emerging Digital Money Architectures
Introduction
In May 2026, developments surrounding the proposed GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) highlighted the growing policy focus on digital forms of money in the United States. At the same time, leading global financial institutions have continued exploring tokenized deposit networks and distributed ledger-based payment infrastructure through initiatives such as Canton Network, JPM Coin, and Project Guardian.
These developments reflect a broader global shift towards digital financial infrastructure. While several jurisdictions and financial institutions are exploring tokenized commercial bank deposits and stablecoin-based ecosystems, India has adopted a distinct approach through the Reserve Bank of India's ("RBI") Central Bank Digital Currency ("CBDC"), commonly referred to as the Digital Rupee.
Understanding Tokenized Deposits
Tokenized deposits are digital representations of commercial bank deposits recorded on distributed ledger technology ("DLT") infrastructure. Similar to the dematerialization of securities, tokenization changes the technological form through which deposits are recorded, transferred, and settled without altering the underlying legal nature of the deposit itself.
Under this model, the depositor continues to maintain a deposit relationship with a regulated commercial bank. The liability remains that of the commercial bank, while distributed ledger technology is used to facilitate recording, transfer, and settlement of the deposit.
Importantly, tokenized deposits should be distinguished from stablecoins. While both may use distributed ledger technology, tokenized deposits represent claims on regulated bank deposits, whereas stablecoins are typically issued under separate arrangements and may be backed by reserves or other assets depending on the applicable regulatory framework.
Key Features of Tokenized Deposit Networks
Dematerialized Representation of Deposits: Tokenization replaces traditional account-based ledger entries with digital representatio-ns recorded on distributed ledger infrastructure. The underlying deposit remains unchanged, but the method of recording and transfer becomes technologically enhanced.
Programmability and Settlement Efficiency: Distributed ledger infrastructure may enable programmable payment features, automation of contractual obligations, and faster settlement processes. Such capabilities are being explored through various pilot projects and industry initiatives globally.
How Tokenized Deposits Operate:
Under a tokenized deposit model, a customer maintains a deposit account with a participating bank. The bank may issue digital tokens representing the corresponding deposit balances on a distributed ledger platform. The bank's internal records remain aligned with the distributed ledger, enabling transfers between participants on the network while maintaining the underlying banking relationship. The objective is to improve settlement efficiency and facilitate digital transaction processing within a regulated framework.
2. India's Digital Rupee Expansion: RBI's CBDC Push for Welfare Distribution and Cross-Border Payments
Introduction
India’s journey in digital payments began with UPI, which has normalized the culture of digital transactions across the country. India is now entering the next phase of digital payments with the Central Bank Digital Currency (CBDC), or the Digital Rupee, issued by the Reserve Bank of India (RBI). The RBI launched a pilot project in 2022, and by early 2025, the Digital Rupee had recorded daily transactions worth roughly ₹5 crore, with over 5 million users and 4 lakh merchants enrolled.
CBDC Integration with Welfare Delivery Systems
The RBI is now exploring the integration of the Digital Rupee with India’s Direct Benefit Transfer (DBT) system, which currently serves more than 90 crore beneficiaries. States such as Gujarat have already launched India’s first CBDC-based Public Distribution System (PDS), utilizing an automated Grain ATM (Annapurti) capable of dispensing approximately 25 kilograms of grain in 35 seconds. The RBI is also in discussions with the Ministry of Finance and the Unique Identification Authority of India (UIDAI) regarding potential linkages between the Digital Rupee and Aadhaarbased payment systems.
For individuals without access to formal banking services, CBDC wallets may provide an additional channel for receiving welfare benefits. Such a system has the potential to reduce delays associated with traditional payment processing mechanisms. Further, programmability features, where implemented, could enable funds to be utilized only for specified purposes, thereby reducing the risk of misuse.
Advancing Financial Inclusion Through Offline Payments
The RBI is also testing offline payment functionality, enabling transactions to take place even without internet connectivity. This functionality could particularly benefit rural and remote areas where internet access remains inconsistent. Together, these features have the potential to advance financial inclusion for India’s unbanked and underbanked population, many of whom continue to rely heavily on cash.
Expanding the Digital Rupee for CrossBorder Payments
India is one of the world’s largest recipients of remittances, receiving over USD 100 billion annually, with the United States, United Arab Emirates, United Kingdom, and Saudi Arabia serving as key remittance corridors. However, the existing remittance ecosystem can be slow and costly owing to the involvement of multiple correspondent banks, compliance requirements, and currency conversions.
The RBI has been exploring cross-border CBDC interoperability through discussions and pilot initiatives with foreign central banks and international institutions. The expansion of the Digital Rupee could make such transactions faster and more efficient, while potentially reducing settlement times. Further cross Banking & Finance Updates border pilot initiatives are anticipated in the coming years, which could particularly benefit regions that receive significant remittance inflows.
Key Challenges and Risks
Despite this progress, CBDCs also present certain risks. Every CBDC transaction is traceable, creating a detailed record of economic activity within a state-regulated infrastructure and raising legitimate privacy concerns. Additionally, any cybersecurity incident affecting interconnected digital payment and welfare delivery infrastructure could have significant consequences for beneficiaries and public trust.
Conclusion
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3. Comprehensive RBI Regulations on Bank Financing to REITs and InvITs |
India’s Digital Rupee has evolved from a pilot project into a practical digital payment tool, with a growing focus on welfare distribution and cross-border payment applications. However, the long-term success of this expansion will depend on effective implementation, adequate public awareness, and robust safeguards. The Digital Rupee could mark a step forward in India’s digital economy, although its ultimate success will depend on how effectively privacy, cybersecurity, interoperability, and adoption challenges are addressed.
Executive Summary
On 10 June 2026, the Reserve Bank of India ("RBI") issued the Reserve Bank of India (Commercial Banks - Credit Facilities) Third Amendment Directions, 2026 ("Amendment Directions"), introducing a dedicated framework for commercial bank financing to Real Estate Investment Trusts ("REITs") and making significant changes to the framework applicable to Infrastructure Investment Trusts ("InvITs").
The Amendment Directions introduce prudential safeguards relating to borrower eligibility, acquisition financing, leverage, end-use monitoring, exposure management, governance, and lender protection. The framework provides greater regulatory certainty regarding bank participation in trust-based investment structures and is expected to influence how commercial banks evaluate and structure financing transactions involving REITs and InvITs.
Background
REITs and InvITs have become important components of India's financial markets. REITs provide investors with exposure to incomegenerating real estate assets, while InvITs offer investment opportunities in operational infrastructure assets across sectors such as transportation, energy, telecommunications, and logistics.
Over the past decade, these structures have emerged as important vehicles for capital formation, asset monetisation, and long-term investment. As their scale and significance have increased, so has the demand for institutional financing and a more formal regulatory framework governing commercial bank participation in such financing arrangements.
The Amendment Directions seek to establish a dedicated regime for REIT financing while strengthening the existing framework applicable to InvITs through prudential requirements relating to eligibility, governance, leverage, acquisition financing, and lender protection.
Key Regulatory Developments
Dedicated Framework for REIT Financing:
One of the key features of the Amendment Directions is the introduction of a dedicated regulatory framework governing commercial bank financing to REITs registered with and regulated by the Securities and Exchange Board of India ("SEBI").
The framework prescribes eligibility conditions intended to ensure that financing is directed towards robust and operational asset portfolios. These conditions focus on the operational profile and asset characteristics of borrowing REITs, including the presence of incomegenerating assets and demonstrated operational performance.
The establishment of a stand-alone REIT financing framework provides greater regulatory clarity regarding institutional credit availability for real estate investment structures and establishes clear prudential parameters for such financing activities.
Strengthening the InvIT Lending Framework:
The Amendment Directions also revise the framework governing financing to InvITs. The revised regime places greater emphasis on operational and revenue-generating infrastructure assets with demonstrated cash-flow visibility. In doing so, the framework aligns certain aspects of InvIT financing with the approach adopted for REITs, thereby promoting greater consistency in the treatment of trust-based investment vehicles.
Governance and Risk Management Requirements
Commercial banks are required to maintain Board-approved policies governing financing to REITs and InvITs. Such policies are expected to establish standards relating to credit appraisal, exposure limits, debt service coverage requirements, monitoring mechanisms, and risk management practices.
These requirements underscore the importance of robust internal governance frameworks and institution-specific risk assessment processes when evaluating financing proposals involving trust-based structures.
End-Use Monitoring and Restrictions Relating to Stressed Assets
The Amendment Directions strengthen monitoring requirements for lending institutions. Commercial banks are required to ensure that financing extended to REITs and InvITs is utilized only for permitted purposes. In addition, the framework restricts financing arrangements that could effectively be used to support stressed underlying exposures in a manner inconsistent with the RBI's prudential and stressed asset resolution frameworks.
These measures are intended to promote credit discipline and mitigate the risk of indirect support being extended to stressed assets through trust structures.
Acquisition Financing
The Amendment Directions expressly address acquisition financing undertaken by REITs and InvITs. The framework permits such financing subject to specified prudential safeguards and regulatory conditions. This provides greater clarity regarding transactions involving strategic acquisitions, asset transfers, and portfolio consolidation undertaken through REIT and InvIT structures.
Leverage and Exposure Controls
The framework introduces prudential safeguards designed to contain concentration and leverage risks. Borrowing REITs and InvITs are required to maintain leverage within the limits prescribed under applicable SEBI regulations, or within lower thresholds specified by lending institutions. Further, aggregate banking system exposure to a borrowing trust and its related entities must remain within the applicable exposure limits.
These safeguards are intended to ensure that financing activity remains consistent with prudent risk management standards.
Enhanced Security and Lender Protection
The framework also strengthens lender protection measures. Financing arrangements may be supported by security structures such as legally enforceable charges over assets, assignment of receivables and cash flows, pledges of ownership interests, and other security interests considered appropriate by lenders. The framework also recognizes contractual protections designed to safeguard lender rights and improve enforceability in the event of borrower default.
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