Sebi slashes social impact fund entry to ₹1,000 from ₹2 lakh to boost retail participation

Markets regulator Sebi has sharply reduced the minimum investment required from individual investors in social impact funds to ₹1,000 from the existing ₹2 lakh, in a bid to widen retail participation on the Social Stock Exchange (SSE).

This would align the minimum application size requirement for subscribing to Zero Coupon Zero Principal Instruments under Sebi's ICDR (Issue of Capital and Disclosure Requirements) Regulations, 2018 with the minimum investment value requirement for individual investors in Social Impact Fund.

Earlier, AIF rules required individual investors to invest a minimum of ₹2 lakh in a social impact fund that invests in securities of NPOs listed or registered on the SSE.

Now, in its notification dated April 16, Sebi reduced this threshold to ₹1,000.

To give this effect, Sebi has amended the Alternative Investment Fund (AIF) rules.

Additionally, Sebi also said AIFs, which do not retain any funds after the expiry of their fund life may be permitted to seek an "inoperative" status, subject to compliance with prescribed norms.

"An Alternative Investment Fund may be tagged as an inoperative fund, in such manner and subject to conditions as may be specified by the Board from time to time," Sebi said.

The move is premised on the principle that while entry into the securities market is subject to specified eligibility criteria, the regulatory framework for exit -- where an entity seeks to discontinue its activities -- should be clear, predictable and operationally efficient.

Earlier, Sebi extended the registration validity for not-for-profit organisations on the Social Stock Exchange, allowing their enrolment as NPOs for three years without raising funds, and lowered the minimum subscription requirement for issuing zero coupon zero principal instruments (ZCZP).

Sebi extended the validity period to three years from the existing two, during which NPOs can remain registered on the SSE without raising funds.

Additionally, the regulator lowered the minimum subscription requirement for zero coupon zero principal instruments to 50 % from 75 % to enhance fundraising flexibility for NPOs.

This relaxation would apply only to projects where costs and outcomes can be implemented on a clearly identifiable per-unit basis, ensuring that partial subscription does not adversely affect project execution, Sebi stated.

In separate notifications, Sebi amended norms governing REITs (real estate investment trusts) and infrastructure investment trusts (InVITs).

(Except for the headline, Fortune India has not edited the content of this PTI report.)