Why Tokenised Deposits Are Gaining Traction
The concept of tokenised deposits refers to digital tokens that represent underlying bank deposit balances, typically issued by a bank and recorded on a permissioned distributed ledger. In the Indian context, the Reserve Bank of India (RBI) has announced a pilot for tokenising deposits using its wholesale central bank digital currency (CBDC) as the settlement layer.
The impetus behind tokenised deposits includes several factors: enhanced liquidity and inter-bank settlement efficiency, improved transparency and auditability in banking flows, potential for programmable money use-cases, and alignment with India’s broader digital finance agenda. By representing deposits as tokens, banks and fintechs may gain new flexibility in how deposits are transferred, collateralised or used in smart-contract flows.
Insight: The RBI pilot begins with selected banks and wholesale flows — retail customer exposure is likely a later phase. }For banks, tokenised deposits could mean faster intraday transfers, lower settlement risk, and new product design possibilities — but they also carry new operational, legal and technology demands.
RBI’s Pilot Programme: What Banks Are Involved and How It Works
In October 2025 the RBI announced that a pilot for deposit tokenisation would begin on 8 October, utilising its wholesale CBDC (often referenced as “e₹-W”) as the underlying settlement layer.
The pilot involves a select group of major banks (public and private) that will issue tokens representing real deposits held at their institutions. These tokens will circulate on a permissioned ledger and settle using the wholesale CBDC rails. The banks involved are reported to include State Bank of India, HDFC Bank, ICICI Bank and Axis Bank among others.
Under the pilot design:
- The bank holds the underlying deposit liability as usual.
- A corresponding digital token is issued to represent the deposit on the ledger.
- The tokens may be used for inter-bank transfers, liquidity management or programmable payment flows rather than mere standard transfers.
- The wholesale CBDC layer ensures final settlement and anchor in central bank money.
This pilot remains inside institutional flows rather than retail depositors for now, allowing banks to test technology, legal enforceability, risk controls and settlement logic without broad public exposure.
Risks, Compliance and Infrastructure Considerations
While tokenised deposits offer promise, banks and fintechs must prepare for several core challenges.
Key areas to address include:
- Legal enforceability: The token must represent a legally binding deposit obligation. The RBI has emphasised that “integrity and enforceability have to be established”.
- Technology risks: Permissioned ledger infrastructure must integrate with existing core banking systems, manage high throughput, ensure cybersecurity, and accommodate fallback pathways.
- Settlement finality & liquidity risk: Banks must ensure the token and underlying deposit remain fully backed and that settlement on the wholesale CBDC layer meets finality assurances.
- Operational resilience and governance: Tokenisation introduces new roles (issuance, ledger management, audit trails) and banks must implement governance frameworks accordingly.
- Data & regulatory compliance: Token flows must respect regulations on deposits, know-your-customer (KYC), anti-money laundering (AML), and other banking norms — especially given new programmable money flows. The RBI notes tokenisation must not create unregulated parallel instruments.
Failure to prepare operational controls properly could lead to settlement disruptions, regulatory exposures or reputational risk around token-backed deposit flows.
Next-Wave Implications for Banks, Fintechs and Retail Users
Once the pilot phase proves successful, tokenised deposits could unlock new banking product models. Some possible implications include:
- Programmable deposits: Deposits that are automatically transferred, time-locked, or conditional on external triggers — enabling smart-contract flows inside banks or partner fintech apps.
- Real-time liquidity transfers: Banks may enable intra-day transfers of large deposits via tokens across branches or institutions with minimal delay.
- Fintech partnership models: Fintechs could embed tokenised-deposit rails into savings, lending and marketplace flows, offering deeper integrations and new value-adds.
- Retail exposure: While current pilots focus on institutional flows, retail tokenised deposits may follow — offering users near-instant transfers, possibly 24/7 liquidity, and enhanced transparency.
For retail users, benefits may include faster transfers, new deposit features (such as locked savings with programmed conditions) and improved clarity on where and how deposits are used. However, banks will need to communicate clearly about differences between token-based deposit flows vs traditional savings accounts to maintain trust and regulatory clarity.
From a competitive standpoint, banks that adopt tokenisation early will likely gain operational efficiency, reduced settlement cost, and stronger fintech collaboration — which may translate into improved customer offerings and cost-competitiveness.
In sum, tokenised deposits are becoming a watchlist item for banks, fintechs and regulators in India. While the pilot stage remains controlled, the implications are far-reaching — blending traditional deposit banking with programmable ledger-based innovation. As the RBI emphasises innovation within guardrails, banks that prepare early stand to lead in the next frontier of digital banking.
Frequently Asked Questions
1. What are tokenised deposits?
They are digital tokens issued by a bank that represent underlying deposit balances, allowing those balances to be transferred or used in ledger-based flows while being backed 1:1 by the bank’s deposit liability.
2. Which banks are participating in the RBI pilot on tokenised deposits?
The RBI’s pilot involves select major banks such as State Bank of India, HDFC Bank, ICICI Bank and Axis Bank, operating under the wholesale CBDC layer.
3. What benefits can tokenised deposits bring to banking infrastructure?
They offer potential benefits like faster settlement, reduced intermediary layers, transparency via ledger audit trails, and new programmability of money flows.
4. What are the main risks banks must manage in tokenising deposits?
Legal enforceability, system integration risk, governance & audit readiness, liquidity & settlement finality, and regulatory compliance (KYC/AML) are key risk areas.
5. When will retail customers see tokenised deposit products?
While the current pilot focuses on institutional/wholesale flows, broader retail offerings may follow if the pilot succeeds — but full rollout will depend on regulatory approval, risk testing and bank readiness.