SEBI proposes lower minimum investment limit for Social Impact Funds: All you need to know

Securities and Exchange Board of India (SEBI), in its latest consultation paper on February 9, proposed lowering the minimum investment threshold for individual investors in Social Impact Funds (SIFs) down to ₹1,000.

Currently, individuals can invest in SIFs that utilise funds exclusively in securities of not-for-profit organisations (NPOs) registered or listed on the Social Stock Exchange (SSE) with a minimum investment of ₹2 lakh.

Under SEBI’s proposal, the market regulator aims to bring the minimum investment amount down to ₹1,000, aligning it with the AIF framework and the minimum application size for Zero Coupon Zero Principal Instruments (ZCZP) under the ICDR regulations. In 2025, SEBI lowered the minimum application size for ZCZP to ₹1,000 from ₹10,000 to encourage investor participation.

“It is proposed that the minimum value of investment by individual investors in Social Impact Fund in AIF Regulations may be reduced to rupees one thousand in order to align it with the minimum application size for subscription to ZCZP under ICDR Regulations,” SEBI said in its consultation paper.

What this means

Social Impact Funds (SIFs) are a category of Alternative Investment Funds (AIFs) that deploy capital into organisations that work on social concerns, such as education, healthcare, financial inclusion, climate change, rural development and livelihood generation.

SIFs aim to generate returns as well as social impact. Under SEBI rules, SIFs can invest in not-for-profit organisations (NPOs) registered or listed on the Social Stock Exchange (SSE) and in for-profit social enterprises that fall under SEBI’s eligibility criteria.

The Social Stock Exchange is a dedicated platform within the existing stock exchanges that allows social organisations and NPOs to raise funds transparently. The SSE operates under both the NSE and the BSE.

Through the SSE, social enterprises get improved access to funding with regulatory oversight and transparency. To list on SSE, NPOs must meet the eligibility criteria set by SEBI, like minimum years of existence, record of social work, etc.

Until now, SIFs on the SSE have had high minimum investment thresholds (₹2 lakh), making it difficult for individual investors to participate. SEBI’s proposal aims to change this, enabling individuals to invest in SIFs for a cause.

What are Zero Coupon Zero Principal instruments?

Zero-Coupon Zero Principal (ZCZP) instruments are financial instruments listed on Social Stock Exchanges (SSE) in India that allow NPOs to raise funds for social projects. Under this structure, no interest is paid to investors and the principal amount is not repaid. This means that investors in ZCZP instruments do not receive financial returns, and their contributions go towards a social cause.

Unlike traditional bonds, these instruments work like structured donations for social impact, as investors do not get their money back; instead see the impact of their contributions.

SEBI’s proposal aims to align the minimum investment threshold for SIFs with ZCZP to increase retail participation in projects that create an impact.

Registration period for NPOs

SEBI has also proposed extending the registration period for NPOs on the SSE to three years, from the current two years, even if they do not raise funds during that period.

Currently, NPOs registered on the SSE must raise funds within two years. If they fail to do so within this period, their registration lapses. SEBI has now proposed to extend this validity to three years.

“The SSEAC recommended that in order to address the practical challenges faced by the NPOs, such as delays in renewal of registration under the Income Tax Act, other statutory approvals, etc., which may delay the fundraising, the registration period may be further extended by one additional year, subject to approval by the SSEs,” SEBI said in the consultation paper.

The Social Stock Exchange Advisory Committee (SSEAC) is a body constituted by the Securities and Exchange Board of India (SEBI) to develop the regulatory framework for the SSE.

“Based on the recommendations of SSEAC, it is decided to further extend the existing period of registration of two years by one additional year, subject to approval by SSEs,” the paper said.

The proposal is aimed at offering greater flexibility, more time and relief to new NPOs to raise funds.

Lower subscription requirement for ZCZP

SEBI has also proposed reducing the minimum subscription requirement for issuance of ZCZP instruments to 50% from 75% for projects where costs and outcomes can be implemented on a clearly identifiable per-unit basis.

When an NPO issues ZCZP instruments on the SSE, it sets a fundraising target. As per SEBI rules, at least 75% of the target must be subscribed before the issue is considered successful and funds can be used.

SEBI’s proposal aims to lower this limit to 50% for certain projects, mainly for those where the project can be broken into clear per-unit execution. These are projects where each unit of money creates one complete outcome.

For example, if ₹20,000 is needed to build a single toilet, the project can be broken down into measurable outcomes, which is why 50% of the funds can result in 50% of the outcomes. For projects where 50% of the funds would not lead to meaningful progress, like building a water treatment plant, this lower limit wouldn't be applicable.

The move will ensure that “partial subscription does not adversely affect the project implementation and that the issue proceeds are meaningfully deployed towards the disclosed objectives of the project in the fundraising document,” SEBI said.

The market regulator has invited comments and suggestions from stakeholders and the public on these proposals, including the lower minimum investment size, extended registration period for NPOs, and changes in subscription rules for ZCZP instruments.

With these reforms, SEBI aims to make impact investing more transparent and accessible for individual investors.