Consultation Paper: SEBI Proposes Lower Investment Threshold for Social Impact Funds and Key Reforms to Social Stock Exchange Framework
Securities and Exchange Board of India (SEBI) has issued a Consultation Paper dated February 9, 2026, seeking public comments on proposed amendments to the regulatory framework governing Social Impact Funds (SIFs) under the SEBI (Alternative Investment Funds) Regulations, 2012 and certain requirements applicable to Not for Profit Organizations (NPOs) on the Social Stock Exchange (SSE).
The proposals aim to deepen participation in the SSE ecosystem, ease fund-raising constraints for social enterprises, and align regulatory thresholds across the AIF and ICDR frameworks.
Background
The Social Stock Exchange framework was operationalised through amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) and related circulars, with the objective of facilitating fund raising by eligible social enterprises.
Subsequently, Social Impact Funds—classified as a sub-category of AIFs—were permitted to invest in securities issued by NPOs registered or listed on the SSE. Based on experience gained since implementation and recommendations of the Social Stock Exchange Advisory Committee (SSEAC), SEBI has reviewed certain entry thresholds and procedural requirements.
Key Proposals
1. Reduction in Minimum Investment by Individual Investors in Social Impact Funds
Existing Framework
Under Regulation 10 of the AIF Regulations, where a Social Impact Fund invests exclusively in securities of NPOs registered or listed on the SSE, the minimum investment by an individual investor is ₹2,00,000.
Proposed Change
SEBI proposes to reduce the minimum investment amount to ₹1,000.
This proposal aligns the AIF framework with the minimum application size for subscription to Zero Coupon Zero Principal (ZCZP) Instruments under the ICDR Regulations, which was reduced to ₹1,000 with effect from March 2025.
Regulatory Intent
Encourage wider participation in social impact investing
Align investment thresholds across SSE-linked frameworks
Enable SIFs to attract small-ticket and retail investors
2. Extension of Registration Period for NPOs on Social Stock Exchange
Existing Framework
An NPO may remain registered on the SSE for up to two years without undertaking fund raising.
Proposed Relaxation
SEBI proposes to allow an additional one-year extension, subject to approval by the SSE, thereby permitting registration for up to three years without raising funds.
Rationale
The extension seeks to address practical challenges faced by NPOs, such as delays in statutory approvals, tax registrations, or readiness for fund raising.
3. Reduction in Minimum Subscription Requirement for ZCZP Issuance
Existing Requirement
Issuance of ZCZP instruments requires a minimum subscription of 75% of the issue size.
Proposed Change
SEBI proposes to reduce the minimum subscription requirement to 50%, subject to the following conditions:
The project cost and outcomes are structured on a clearly identifiable per-unit basis
Partial subscription does not adversely affect project implementation
Social Stock Exchanges undertake due diligence on feasibility at lower subscription levels
Where minimum subscription is not achieved, the issue proceeds must be refunded.
Proposed Regulatory Amendments
To implement the above proposals, SEBI has suggested:
Amendment to Regulation 10 of the AIF Regulations to reduce the minimum investment in SIFs
Partial modification of the Master Circular on the SSE framework
Issuance of an enabling circular under the ICDR Regulations
Implications for Stakeholders
For Social Impact Funds
Potential expansion of investor base
Increased participation from retail and small investors
Need to reassess onboarding, reporting, and compliance processes
For NPOs on SSE
Longer preparatory runway prior to fund raising
Greater flexibility in achieving minimum subscription
Improved feasibility of project-based fund raising
For the SSE Ecosystem
Lower entry barriers
Enhanced alignment between AIF and SSE regulations
Potential increase in transaction volumes and participation
Conclusion
SEBI’s proposals reflect a calibrated regulatory approach aimed at democratising social impact investing while maintaining appropriate safeguards for investors. By reducing investment thresholds and rationalising procedural requirements, the regulator seeks to strengthen the long-term viability of the Social Stock Exchange framework.
Stakeholders are encouraged to review the consultation paper in detail and submit their comments to SEBI within the prescribed timeline.