SEBI approves Rs 1,000 minimum investment in Social Impact Funds, eases norms for NPOs on Social Stock Exchange

The SEBI board has reduced the minimum investment amount for individual investors in SIFs from Rs 2 lakh to Rs 1,000, provided such funds invest exclusively in securities issued by NPOs registered or listed on the SSE.

• SEBI lowers SIF minimum investment from Rs 2 lakh to Rs 1,000
• NPO registration validity on SSE extended from 2 to 3 years
• ZCZP minimum subscription now 50% for unit-based projects

Did our AI summary help?

Markets regulator Securities and Exchange Board of India (SEBI) has approved a significant reduction in the minimum investment threshold for individual investors in Social Impact Funds (SIFs), along with easing compliance requirements for not-for-profit organisations (NPOs) under the Social Stock Exchange (SSE) framework. The measures are aimed at broadening investor participation and facilitating smoother fundraising for social enterprises.

This was reported exclusively by Moneycontrol on March 19.

The SEBI board has reduced the minimum investment amount for individual investors in SIFs from Rs 2 lakh to Rs 1,000, provided such funds invest exclusively in securities issued by NPOs registered or listed on the SSE. The move aligns the Alternative Investment Fund (AIF) framework with the minimum application size prescribed for Zero Coupon Zero Principal (ZCZP) instruments under the ICDR regulations applicable to NPOs. By lowering the entry barrier, SEBI aims to attract a wider base of retail and small investors into the social impact investment space, thereby improving capital flows to the sector.

In addition, SEBI has approved an extension of the registration validity period for NPOs on the SSE from two years to three years without the requirement to raise funds during this period. This extension will be subject to approval by the social stock exchanges. The change addresses practical challenges faced by NPOs, such as delays in obtaining or renewing tax registrations and other statutory approvals, which can hinder timely fundraising.

Further, the regulator has relaxed the minimum subscription requirement for ZCZP issuances. SEBI has allowed the threshold to be reduced from 75 percent to 50 percent in cases where project costs and outcomes can be implemented on a per-unit basis. This flexibility is intended to ensure that projects can proceed even with partial funding, provided execution remains viable. However, such relaxation will be subject to due diligence by the SSEs to ensure that partial subscriptions do not adversely affect project implementation and that funds raised are deployed effectively for the intended objectives outlined in the fundraising documents.

These reforms follow recommendations from the Social Stock Exchange Advisory Committee, which reviewed the existing framework to identify ways to strengthen the SSE ecosystem. The changes are expected to enhance fundraising efficiency, improve accessibility for investors, and support the growth of social enterprises in India.