The Securities and Exchange Board of India (SEBI) has proposed lowering the minimum application size for zero coupon zero principal (ZCZP) instruments issued by non-profit organisations (NPOs) on the Social Stock Exchange (SSE) to either ₹5,000 or ₹1,000, down from the current ₹10,000.

The move, detailed in SEBI’s latest consultation paper, aims to boost retail participation in ZCZP issuances and make it easier for individuals to contribute towards social causes. Public comments on the proposal have been invited until March 14, 2025.

Encouraging retail participation in social impact investing

ZCZP instruments allow individuals to donate money to NPOs listed on the SSE without any expectation of returns. SEBI’s latest proposal follows its November 2023 decision to halve the minimum issue size of ZCZP from ₹1 crore to ₹50 lakh and reduce the minimum application size for donors from ₹2 lakh to ₹10,000.

The move comes as issuers highlighted that while retail interest in giving through the SSE is increasing, the current ₹10,000 minimum application size could be a barrier for many contributors.

A step towards greater visibility for NPOs

Commenting on SEBI’s proposal, Pradnesh Kamat, Partner at MMJC Associates, said: “Within a period of two months, SEBI has released a second consultation paper on the Social Stock Exchange. The current proposal on reducing the application size for NPOs is in line with the same objective.”

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He further noted that simplifying processes is a welcome step and called for greater visibility for NPOs once listed on BSE and NSE. “Providing easy accessibility to an NPO’s work, social impact, and financial performance will encourage more participation,” he added.

Kamat also suggested that SEBI should consider making provisions of ICDR regulations on equity issue advertisements applicable to NPOs planning to list on the SSE to enhance transparency and awareness.

The evolving role of the Social Stock Exchange

The Social Stock Exchange (SSE) was first proposed by Finance Minister Nirmala Sitharaman in the Union Budget 2019-20 as a platform to channel capital towards social enterprises and non-profits.

The SSE operates as a separate segment on existing stock exchanges, bringing together social enterprises and donors, facilitating funding and growth, and ensuring robust standards of impact and financial reporting.

With SEBI actively working to expand participation and streamline processes, the regulator’s latest move could encourage more retail investors to support social causes, strengthening the SSE’s role in impact-driven investing.

(With PTI Inputs)