SSE reform, a leg-up for releasing funds for charity work | Photo Credit: Nisha Dutta

Social stock exchanges (SSE), launched in the second half of FY23, have been in a comatose state. In a bid to give them a leg up, the Centre last week allowed companies to invest up to 10 per cent of the funds earmarked for corporate social responsibility (CSR) activities in zero coupon zero principal (ZCZP) bonds. ZCZP bonds are issued by non-profits to raise funds through the SSEs. While around 170 non-profit organisations are registered with the exchanges, less than 10 per cent have made issuances so far. There have been just 16 issuances raising around ₹42 crore. The new rules are expected to release ₹3,000 crore annually from corporate coffers. This is all very well, provided the supply of ZCZP bonds too picks up.

The potential demand for such instruments is not a concern. The Companies Act mandates that at least 2 per cent of average net profits recorded during the preceding three financial years should be set aside for CSR projects. This has resulted in more than ₹30,000 crore being available every year for projects linked to education, health, environment sustainability, rural development and so on. Under the new rules, companies in search of credible organisations or projects to spend their funds can buy into ZCZP bonds on social stock exchanges. Unspent CSR funds of BSE 200 companies had amounted to ₹1,920 crore in FY25 and ₹1,708 crore in FY24.

But the supply of investible instruments must pick up. Recently, SEBI had allowed non-profits to remain registered with exchanges even if they do not make any issuances for three years, extending the timeline from two years earlier. SEBI had also reduced minimum subscription in ZCZP issuances from 75 per cent to 50 per cent. But besides these, SEBI must review the rules it has set out for non-profits — regarding eligibility criteria, annual disclosures, annual spends, audits and annual impact disclosures. In a bid to enhance credibility and transparency, SEBI may have laid down rules that are too onerous for small non-profits. Smaller non-profits in genuine need for funds are possibly discouraged from approaching this platform. A discussion with registered non-profits on their hardships could lead the way for another constructive set of reforms.

SSE set up by SEBI is one of its kind globally. It is a government-led initiative — unlike other countries where private trusts and organisations alone run these platforms. SEBI has been trying to increase demand on the platform by reducing the minimum subscription for ZCZP bonds from ₹10,000 to ₹1,000 and reducing the minimum subscription in social impact funds (which invest on SSE) from ₹2 lakh to ₹1,000. This could allow more small investors to participate on these platforms. The regulatory framework for SSEs, has however done well to bar entities where diversion of funds or money laundering is possible. Political and religious organisations, and trade associations cannot raise funds through SSEs. Overall, a balance between accountability and autonomy is called for.

Published on June 1, 2026