The capital markets regulator SEBI has introduced a number of positive developments in the area of SSE development. In its latest circular, issued on Wednesday, SEBI highlighted that NPOs will be registered for a longer period while their fundraising process would become less complicated. The aim is to attract many social organizations to take part in the market and make the process of fundraising simpler.

The regulator has increased the period for which NPOs will continue to be listed without any need to raise funds from them. While earlier, the duration was two years, it is now three years. SEBI has taken this decision considering the practical challenges faced by NPOs, such as delays in obtaining statutory and regulatory approvals.

According to the new rules, an NPO can remain registered on the exchange without raising funds for two years from the date of registration. Subsequently, this period can be extended for an additional year with the approval of the Social Stock Exchange (SSE).

To provide flexibility in fundraising for NPOs, SEBI has reduced the minimum subscription requirement for 'Zero Coupon Zero Principal' (ZCZP) instruments from 75 percent to 50 percent. However, the regulator has clarified that this relaxation will only apply to projects where costs and outcomes can be clearly quantified on a per-unit basis. This will ensure that partial funding does not negatively impact project execution.

Under SEBI guidelines, the Social Stock Exchange must conduct due diligence before granting in-principle approval in cases of partial fundraising. The exchange must ensure that the funds raised are utilized meaningfully and that the project objectives remain viable. Furthermore, if the minimum subscription requirement is not met, investors' funds will be refunded.

SEBI is continuously making efforts to increase the participation of retail investors in the market. Earlier in March, the SEBI board took a major decision to facilitate individual investor participation in social impact funds. The regulator significantly reduced the minimum investment limit from ₹2 lakh to just ₹1,000 to facilitate fundraising for NGOs.

These latest reforms by SEBI are expected to increase both investment and participation on the Social Stock Exchange. Reducing investment limits for small investors and easing compliance requirements for NGOs will create a new and robust framework for transparent fundraising for social projects in India.