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Tag: #ZCZP

  • Social Stock Exchange: A Game-Changer for CSR in 2026

    Social Stock Exchange: A Game-Changer for CSR in 2026

    India’s Social Stock Exchange (SSE) is not a new bourse like NSE or BSE. It is a dedicated segment within these exchanges where not‑for‑profit organisations (NPOs) can raise money for social projects through listed instruments. The idea: use the familiar machinery of the stock market to route philanthropic and CSR capital, while improving transparency, governance and accountability.

    What problem is it trying to solve?
    For years, companies mandated to spend on Corporate Social Responsibility (CSR) under Section 135 of the Companies Act have channelled funds via grants, trusts, foundations and government funds. But there was no regulated, market‑like platform that could:

    • Vet social enterprises in a standard way,
    • Disclose how money is being used, and
    • Let multiple funders participate in the same project with clear terms.

    SEBI’s SSE, operational since 2023, was built to fill this gap.

    How does it work?

    Eligible NPOs register on the SSE and issue Zero Coupon Zero Principal (ZCZP) instruments. These are not typical bonds:

    Zero coupon: Investors get no interest.

    Zero principal: There is no repayment of the principal amount.

    In effect, a ZCZP is a donation structured as a listed security. The money raised must be used for the NPO’s stated social projects, with disclosures on the exchange platform.

    What changed in 2026?
    The big shift came on May 27, 2026, when the Ministry of Corporate Affairs (MCA) amended the Companies (CSR Policy) Rules, 2014 and Schedule VII of the Companies Act. Two changes matter most:

    1. ZCZP on SSE is now an eligible CSR activity
    • A new item (xiii) was inserted into Schedule VII: “Subscription to zero coupon zero principal instruments on Social Stock Exchange.”

    2. A 10% cap and an exemption

    • Companies can now route up to 10% of their total CSR expenditure in a financial year into ZCZPs listed on SSE.
    • For this slice, they are exempt from conducting a separate impact assessment, which has been a major administrative burden for CSR teams.

    In parallel, SEBI eased some SSE norms in April 2026, including extending the NPO registration window and lowering the minimum subscription threshold, to make it easier for credible NPOs to come in and for issues to succeed.

    Why should companies and NGOs care?
    For companies, the SSE route offers:

    • A regulated channel to deploy part of CSR funds, with exchange‑style disclosures.
    • Lower compliance load for up to 10% of CSR spend, thanks to the impact‑assessment exemption.
    • The ability to co‑fund specific projects alongside other corporates through the same ZCZP issue.

    For NPOs/NGOs, it offers:

    • Access to a national investor base (including retail with demat accounts), not just a few large donors.
    • A structure that can improve credibility and trust, given SEBI’s oversight and disclosure norms.
    • A potential path to scale recurring social programmes with clearer funding visibility.

    Where is it headed?
    Despite the policy push, the government has not carried out any assessment on how much the ZCZP route will actually boost institutional CSR inflows, Parliament was told in August 2026. The key test now is adoption: whether CSR committees are comfortable routing part of their budgets through ZCZPs, and whether enough high‑quality NPO pipelines emerge to make the market meaningful.

    Early movers are already testing the model. In August 2026, DEVI Sansthan, an NPO working on foundational literacy, listed on the BSE SSE to mobilise resources for its programmes. Separately, a coalition led by ImpactScale Ventures, with support from NSE, SEBI’s advisory committee and US TIFA, announced a TB‑focused thematic raise on SSE, aiming to help 15+ TB NGOs register and 8–10 list projects to raise around Rs 50 crore via ZCZPs.

    The bottom line
    The Social Stock Exchange does not replace traditional CSR. It adds a regulated, market‑linked option for a slice of CSR money, with the promise of greater transparency and easier compliance for that portion. The 2026 amendments—especially the 10% cap and impact‑assessment exemption—are designed to nudge companies to try the route. Whether SSE becomes a meaningful channel for India’s CSR pool will depend on how quickly credible NPOs list, and how comfortable boards become with this new instrument

  • No assessment done on ZCZP instruments boosting CSR funds: Govt

    No assessment done on ZCZP instruments boosting CSR funds: Govt

    The government has not carried out any assessment on the extent to which the newly introduced “Subscription to zero coupon zero principal (ZCZP) instruments on Social Stock Exchange” is likely to boost the inflow of institutional capital into the social sector, Parliament was informed on Monday.

    In a written reply to the Lok Sabha, Minister of State for Corporate Affairs Harsh Malhotra said, “No such assessment has been conducted by the ministry.”

    The Ministry of Corporate Affairs, through a notification dated May 27, 2026, widened the ambit of Schedule VII of the Companies Act, 2013, by introducing a new item — “Subscription to zero coupon zero principal instruments on Social Stock Exchange” — as an eligible Corporate Social Responsibility (CSR) activity.

    As per the amendment, a CSR-mandated company cannot subscribe to ZCZP instruments for more than 10 per cent of its total CSR expenditure for that financial year.

    Malhotra said the move is intended to ease compliance for companies while helping not-for-profit organisations raise funds for public welfare projects “in a transparent and regulated manner.”

    The ZCZP instrument, listed on the Social Stock Exchange, allows companies to channel CSR funds to eligible non-profits without expecting financial returns, aiming to formalise and bring greater transparency to social sector financing.

  • Sebi boosts Social Stock Exchange with NPO registration relief

    Sebi boosts Social Stock Exchange with NPO registration relief

    Securities and Exchange Board (Sebi) has boosted key rules for not-for-profit organisations on the Social Stock Exchange (SSE), extending the period during which NPO registration remains valid without fund-raising to three years from two, as it seeks to widen the fledgling platform’s reach.

    The regulator issued a circular on Wednesday outlining measures it said were aimed at promoting the SSE and facilitating fundraising for non-profits facing practical hurdles, including delays in statutory and regulatory approvals.

    Under the revised framework, an NPO may remain enrolled on an SSE for two years without raising capital through it. That window can be extended by a further year, subject to SSE approval — giving social-sector organisations more runway to ready themselves before tapping investors.

    “A NPO may register on a SSE and not raise funds through it for a period of two years from the date of registration. Such period of two years may be further extended by one additional year subject to approval by the SSE,” Sebi said.

    Sebi also slashed the minimum subscription threshold for Zero Coupon Zero Principal (ZCZP) instruments — the primary debt-like tool available to NPOs on the SSE — to 50 per cent from 75 per cent. The relaxation applies only to projects where costs and outcomes can be tracked on a clearly identifiable per-unit basis, ensuring that a partial fund-raise does not undermine project viability.

    SSEs will be required to conduct due diligence before granting in-principle approval for such partial fundraising, satisfying themselves that proceeds can be deployed meaningfully toward the stated objectives. Funds will be refunded to investors if the minimum subscription threshold is not met.

    The moves come weeks after Sebi’s board in March eased the minimum investment required from individual investors in social impact funds to Rs 1,000 from Rs 200,000, a step aimed at broadening retail participation on the SSE.

    The SSE, launched in 2022, has struggled to attract widespread participation. Analysts have cited high compliance costs and rigid fundraising conditions as barriers for smaller NPOs. Wednesday’s circular signals continued regulatory effort to unlock the platform’s potential as a mainstream social-financing channel.