IMPRI Impact And Policy Research Institute

Policy Update
Arya Gupta

1.Background

In the past, all of India’s social sector (an estimated 3 million-plus registered NPOs) had been relying on philanthropy, government grants or funds received via the Corporate Social Responsibility (CSR) mechanism, which are more often than not one-off grants and not income earning. In a Union Budget speech for FY 2019-20, Finance Minister Nirmala Sitharaman had proposed the launch of a ‘Social Stock Exchange’ (SSE) to enable ‘social enterprises to raise capital as equity, debt or as units like a mutual fund’. SEBI then set up a Working Group (September 2019, report May 2020) and a Technical Group (September 2020, report May 2021) to develop the regulatory framework for the SSE, which was formally approved in September 2021.

The SSE came into effect by virtue of the SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2022, notified in July 2022, that have prescribed the eligibility criteria for Not-for-Profit Organisations (NPOs) and For-Profit Social Enterprises (FPEs). In-principle approval for the establishment of the Social Stock Exchange (SSE) segment was granted to BSE in October 2022 and to NSE on 19 December 2022. Subsequently, SEBI granted final approval to NSE on 22 February 2023 to launch the Social Stock Exchange as a separate segment.

The key innovation was the Zero Coupon Zero Principal (ZCZP) instrument, which is a security under the Securities Contracts (Regulation) Act, 1956 that does not pay any interest or principal, and the investor’s ‘return’ is measured by an investment in social impact instead of monetary returns. The goal was to go beyond philanthropy and CSR to open up the social sector to capital, based on transparency and disclosure through exchange, thus gaining investor and donor trust.

2.Functioning

The SSE is a separate division of NSE and BSE and falls under the jurisdiction of SEBI as per the ICDR and LODR Regulations. To register, an NPO should be legally established in India (as a charitable trust, registered society or as a Section 8 company) have an operational history of at least three years, have valid NPO Darpan registration, and have an income tax registration certificate valid for at least a year thereafter, a term recently extended, so that the registration itself would last for three years. The eligibility requirements for FPEs are different and are linked to a specific set of eligible social outcomes (such as poverty eradication, health, education, livelihoods, environment, etc.).

The Zero Coupon Zero Principal (ZCZP) instrument is the main instrument used for raising funds on the Social Stock Exchange (SSE). ZCZP instruments are not paid interest nor do they return the face value, as in the case of regular bonds. Instead, investors invest money in qualified Non-Profit Organisations (NPOs) expecting to make a measurable difference in the world, but not financially.

The instruments of ZCZP can be offered in public or private offers with a minimum issue size of ₹50 lakh and the minimum subscription by the investors is ₹1,000. Capital can also be raised through listing of equity securities on the SSE by For-Profit Social Enterprises (FPEs). Listed entities are required to be assessed by a SEBI recognised Social Impact Assessor (SIA) and submit an Annual Impact Report (AIR) reporting the social impacts with regard to the funds raised.

3.Performance

Although registrations on the Social Stock Exchange have grown significantly, successful fundraising activity has remained relatively low. At the time of the first listing by SSE in December, 2023, NSE registered 38 registered NPOs, which reached 90 registered social enterprises in May, 2026. But real fundraising activity is another story: since the first SGBS Unnati Foundation listing in December 2023 (which raised ₹1.8 crore from four investors including Zerodha and NABARD), less than 20 entities have ever completed a ZCZP fundraise, raising a combined amount of approximately ₹44 crore till early 2026, a small portion of the ₹100 crore that the government separately earmarked for social impact bonds for FY 2023-24 in the Union Budget.

Indicator	At Launch (2022-2023)	Latest Available (2025-26)
NPOs registered on NSE-SSE	38 (Dec 2023)	90 (May 2026)
Entities that have actually raised funds	1 (SGBS Unnati Foundation, Dec 2023)	Fewer than 20, cumulatively, since inception
Total funds raised via ZCZP	₹1.8 crore (first listing)	~₹44 crore cumulative (early 2026), incl. Swades Foundation’s ₹10 crore raise (2024)
Minimum investor subscription	₹2 lakh (2022 design)	₹1,000 (since March 2025)
Minimum issue size	₹1 crore (2022 design)	₹50 lakh
Minimum subscription (issue-level)	75% required	Reduced to 50% (April 2026)
CSR funds eligibility via SSE	Not permitted (2022-2025)	Up to 10% of annual CSR spend now eligible via ZCZP (MCA notification, May 2026)

Source: Compiled from Business Standard (2023, 2025, 2026), Finshots (2026), World Economic Forum (2026), Lexology (2026), and Business Today (2026). See Selected References for full citations.

SEBI has taken a series of steps to reduce friction by cutting the minimum amount of investment from ₹2 lakh to ₹10,000 and then to ₹1,000, the minimum size of the issue, was halved and the proportion of issue subscribed by investors was reduced from 75% to 50%.

Not a SEBI reform perhaps, but perhaps the most consequential change in the recent past is the permit issued in May 2026 by the Ministry of Corporate Affairs for the companies to divert as much as 10% of their annual CSR expenditure towards instruments under ZCZP, which brings the SSE in contact with a much larger and institutionally more robust pool of capital than any voluntary retail investment or HNI investment has brought it so far.

4.Impact

So far, the SSE’s contribution to social finance, defined by its original goal of becoming a serious social finance market intermediary, has been relatively small, but is very focused. A sum of ₹44 crore raised over three years is a rounding error in the tens of thousands of crores in the annual CSR outlay of India and even in the ₹100 crore allocated by the government in one budget year for social impact bonds.

The discrepancy between 90 NPOs registered and less than 20 that have raised funds suggests that, registration an important compliance and governance measure is not correlated with a successful fundraising effort for most NPOs, likely due to the costs associated with listing, auditing, and applying for a Social Impact Assessor, which are disproportionately high for the small-sized NPOs compared to the amount of money that they can raise.

It is in the building of regulatory and professional infrastructure that SSE has been more successful it has a functioning Social Impact Assessor ecosystem, with recognised Self-Regulatory Organisations, has created standardised Annual Impact Report disclosures, and has a track record albeit small in absolute number of successful, repeat fundraisings, including Unnati Foundation’s 2026 return to the SSE. Social stock exchanges are known to have difficulties in the first few years of operation, based on international experience, especially regarding the participation of investors, fundraising and market development. Thus, India’s relatively modest pace is not an exception, but is characteristic of social finance market development in general.

5.Emerging Issues

It continues to have a significant registration to fundraising gap, with just 11 of the 90 registered NPOs having raised via a ZCZP, despite multiple reductions in thresholds, compliance costs and market unfamiliarity appear to remain a constraint.
The lack of a financial return is a true behavioural hurdle for investors used to investing in return-generating securities: the SSE was a true competitor to rather than a complement of the traditional investment in donations.
Smaller NPOs bear an unfair burden of the listing, audit and Social Impact Assessor costs, meaning that the very grass roots organisations that were intended to be aided by the SSE to access new capital are being excluded.
Investors, both retail and institutional, are not that aware of ZCZP instruments and there has not yet emerged a meaningful secondary market for these securities. Investor awareness of ZCZP instruments remains limited because they are a relatively new financial instrument, receive little mainstream financial coverage, offer no monetary returns unlike conventional securities, and are primarily understood within specialised impact-investing circles.
The linkage of CSR to ZCZP for May 2026 is untested; it will be interesting to see if corporates reallocate their CSR spend through the SSE route or continue direct grant-making in the next 1 to 2 reporting cycles.

6.Way Forward

The first step should be making the CSR-ZCZP linkage a reality from a regulatory perspective and not just a possibility by providing guidance for companies to face the reality of the link, introducing standardised due-diligence forms, and creating incentives, such as public recognition or reporting, for companies that channel CSR investments through the SSE. The compliance cost is particularly high for smaller NPOs, thus it would be great to have a tiered disclosure and Social Impact Assessor framework lighter compliance for smaller issue sizes which will encourage more organisations to engage, outside the well-resourced organisations that have been the ones so far.

SEBI and the exchanges should also put in efforts to educate investors about the ZCZP, particularly the zero-return aspect of it, which is not very well known and understood outside the specialist impact investing circles. Lastly, a clear, transparent and periodic public dashboard of registrations, completed raises and realised social impact based on the rate of change in 2025-26 would allow researchers and policymakers to judge within the next two to three years whether the CSR linkage is the breakthrough in the SSE that it appeared it was in 2025-26 or whether more redesign is required.

Although the number of companies submitted to the Social Stock Exchange has increased, the fundraising results are modest, but an important regulatory framework has been set up to mobilise private capital to support social development. However, the ecosystem has become stronger with recent changes, such as reducing investment thresholds, adding CSR companies to the list, but more awareness among investors, reduced compliance requirements and participation from more NPOs will be the deciding factors if the SSE will fulfil its potential as a channel of financing social India.

7.References

Securities and Exchange Board of India. (2026, January 19). Master Circular for Framework on Social Stock Exchange. https://www.sebi.gov.in/legal/master-circulars/jan-2026/master-circular-for-framework-on-social-stock-exchange-_99166.html

Securities and Exchange Board of India. (2025, March). Framework on Social Stock Exchange (SSE). https://www.sebi.gov.in/legal/circulars/mar-2025/framework-on-social-stock-exchange-sse-_92767.html

Business Standard. (2023, December 13). Social stock exchange sees first listing with Unnati Foundation. https://www.business-standard.com/markets/news/social-stock-exchange-sees-first-listing-with-unnati-foundation-1st-entity-123121301099_1.html

Business Standard. (2025, September 19). Sebi expands eligibility for NGOs to raise funds via social stock exchange. https://www.business-standard.com/markets/news/sebi-expands-eligibility-for-ngos-to-raise-funds-via-social-stock-exchange-125091900925_1.html

Business Standard. (2026, May 30). Social stock exchanges set for boost as Centre tweaks CSR investment norms. https://www.business-standard.com/amp/markets/news/social-stock-exchanges-set-for-boost-as-centre-tweaks-csr-investment-norms-126053000629_1.html

Business Today. (2026, May 30). NSE Social Stock Exchange: Companies can now route up to 10% of CSR funds; know how. https://www.businesstoday.in/markets/story/nse-social-stock-exchange-companies-can-now-route-up-to-10-of-csr-funds-know-how-534077-2026-05-30

Finshots. (2026, March 6). India’s Social Stock Exchange just got a hat-trick IPO. https://finshots.in/markets/indias-social-stock-exchange-just-got-a-hat-trick-ipo/

World Economic Forum. (2026, March 25). Lessons on trading impact from India’s Social Stock Exchange. https://www.weforum.org/stories/2026/03/lessons-trading-impact-india-social-stock-exchange/

Lexology. (2026, April 23). SEBI Eases Social Stock Exchange Norms for NPOs. https://www.lexology.com/library/detail.aspx?g=c5002e33-090c-4037-9502-e5a03a374312

Rupan Jande. (2023). Social Stock Exchange: The Regulatory Framework. https://www.rupanjanade.com/post/social-stock-exchange-the-regulatory-framework

About The Contributor

Arya is a Research and Editorial Intern at IMPRI Impact and Policy Research Institute, New Delhi, and a Program Coordinator at Metvy. A fourth-year Economics graduate of Shri Ram College of Commerce (SRCC), University of Delhi, Arya’s research interests include Indian political economy, labour markets and development policy.