SEBI Extends Validity For NPOs On Social Stock Exchange

India’s social finance push got a fresh tweak this week, with the Securities and Exchange Board of India (SEBI) loosening key rules for not-for-profit organisations (NPOs).

The regulator has extended how long organisations can stay registered on the Social Stock Exchange (SSE) without raising funds and also cut the minimum subscription needed for certain instruments. The idea is to remove roadblocks that have slowed participation so far.

The announcement comes at a time when the Social Stock Exchange is still finding its footing, with relatively few listings and modest fundraising activity since launch.

What Has Changed For NPO Registrations?

SEBI has allowed not-for-profit organisations to remain registered on the platform for up to three years without raising funds, compared to the earlier two-year window. The extra year is not automatic and will need approval from the exchange.

The regulator pointed to delays in approvals and compliance processes as a key reason behind the move. Many organisations, especially smaller ones, take time to get their documentation and project structures in place before approaching investors.

In effect, this gives them more time to prepare rather than rush a fundraising attempt just to stay listed.

Why Lower The Subscription Requirement?

One such development relates to the method of raising money. In the case of zero coupon zero principal (ZCZP) investments, SEBI has cut down the subscription limit from 75% to 50%.

The reason why they are chosen mostly by non-profit organisations is that there is no guarantee of any monetary gains in return. This was an impediment while closing deals in past situations.

With the new rule, organisations can go ahead even if they raise only half the targeted amount, provided the project can still be executed in a meaningful way. Exchanges will have to check this before giving approval.

If the minimum level is not met, investors will get their money back, keeping a basic layer of protection intact.

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Will This Boost Activity On The SSE?

SEBI has been making gradual changes to improve participation on the Social Stock Exchange. Just last month, it reduced the minimum investment amount for social impact funds to ₹1,000 (from ₹2,00,000), opening the door to retail investors.

The latest steps focus on the supply side, making it easier for organisations to come on board and raise money without tight timelines or high thresholds.

Whether this leads to a noticeable pickup in activity is still an open question. Much will depend on how quickly organisations adapt and whether investors see enough credible projects to back.

Sources:

The Hindu

Financial Express