The move could boost demand and participation in India’s Social Stock Exchange | Photo Credit: sarayut

In a move aimed at deepening India’s nascent Social Stock Exchange (SSE) ecosystem, the Ministry of Corporate Affairs (MCA) has allowed companies to deploy a portion of their Corporate Social Responsibility (CSR) spending through Zero Coupon Zero Principal (ZCZP) instruments. The decision comes nearly four years after ZCZP instruments were formally recognised as securities under the Securities Contracts (Regulation) Act, 1956.

Under a notification issued by the MCA, companies will now be permitted to channel up to 10 per cent of their annual CSR expenditure through ZCZP instruments. The rules further clarify that companies subscribing to such instruments will not be allowed to undertake impact assessments of projects financed through them.

Instrument Rules

A ZCZP instrument carries neither interest payments nor repayment of principal, effectively making it a philanthropic funding mechanism routed through a market framework.

Under Section 135 of the Companies Act, firms with a net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of at least ₹5 crore in the immediately preceding financial year are required to spend a minimum of 2 per cent of the average net profits of the preceding three financial years on CSR activities. Failure to comply can attract penalties of up to ₹1 crore.

The notification defines ZCZP instruments as securities issued by not-for-profit organisations (NPOs) registered on the SSE segment of a recognised stock exchange. Such organisations will be permitted to undertake projects with a duration of not more than three succeeding financial years from the date of issuance. In the event of delisting or termination of the instrument, any unspent amount will have to be transferred to funds specified under the approved list of CSR activities.

Demand catalyst

Experts view the move as a potentially significant boost for the SSE. “India Inc spends close to ₹35,000 crore annually on CSR, and even a modest share of that routed through a listed and regulated platform could create the kind of demand the exchange has lacked so far,” said Manpreet Singh, Partner and Sustainability Practice Leader at Grant Thornton Bharat.

Sandeepp Jhunjhunwala, Partner at Nangia Global Advisors, said the framework creates a more credible and governance-driven channel for CSR deployment.

Singh pointed to two potential limitations. First, the rules exempt these instruments from independent impact assessment requirements on the assumption that exchange-mandated disclosures provide sufficient transparency. “Boards may still want assurance that being listed is not necessarily the same as being independently verified,” he observed. Second, the number of credible non-profit organisations currently listed on the Social Stock Exchange remains limited, raising questions about whether the supply of quality issuances can keep pace with the demand the new framework may generate.

Published on May 29, 2026