SEBI Proposes ₹1,000 Minimum Investment For Social Impact Funds

The Securities and Exchange Board of India (SEBI) has proposed cutting the minimum investment amount for individual investors in social impact funds (SIFs) to ₹1,000 from the existing ₹2 lakh, according to a discussion paper released by the regulator on February 10. The proposal aims to widen participation in social impact investing by allowing small investors to invest in securities issued by not-for-profit organisations (NPOs) through SIFs.

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SEBI stated in the paper that lowering the threshold would help social impact funds attract a broader base of investors and increase capital flow to eligible social enterprises and NPOs listed on the social stock exchange.

Alignment With ZCZP Instrument Norms

The market regulator said the proposed reduction in the minimum investment amount is intended to align SIF investment norms with the subscription size prescribed for zero-coupon zero principal (ZCZP) instruments on the social stock exchange. ZCZP instruments are designed to raise funds for social projects without offering interest or principal repayment, as per SEBI regulations.

According to SEBI, harmonising the investment limits across SIFs and ZCZP instruments would create consistency in participation rules for investors engaging with social finance products on the exchange platform.

Changes Proposed For NPO Registration Period

SEBI has also proposed extending the validity of registration for not-for-profit organisations on the social stock exchange to three years from the current two years, in cases where the NPO does not undertake fundraising during the registration period. The regulator said the proposed change would reduce the compliance burden on NPOs that are registered for visibility and credibility but are not actively raising funds.

As per existing norms, NPOs are required to renew their registration every two years, irrespective of fundraising activity. SEBI said the revised timeline would provide operational flexibility while maintaining regulatory oversight.

Relaxation In ZCZP Subscription Requirement

In addition, SEBI has suggested reducing the minimum subscription requirement for the issuance of ZCZP instruments to 50% from the existing 75% for select projects. The proposed relaxation would apply to projects where the total cost of the disclosed objectives can be proportionately allocated on a per-unit basis.

The regulator clarified that such issuances would be subject to appropriate due diligence by the social stock exchange to ensure transparency and proper utilisation of funds. The goal of the proposal is to make it easier for eligible projects to raise money while still protecting investors.

Public Consultation Process

SEBI has invited public comments on the proposals outlined in the discussion paper, that is, within the consultation period, as part of the usual regulatory process. The feedback received shall be looked at before final modification of the rules relating to social impact funds, NPO registration, and ZCZP instruments.

The proposals are part of SEBI's continuing efforts towards increasing participation in the social stock exchange ecosystem and easing fundraising for social sector organisations within the existing framework.