SEBI slashes minimum investment in social impact funds to Rs 1,000

Mumbai: The Securities and Exchange Board of India (SEBI) has drastically slashed the minimum investment requirement for individual investors in social impact funds to Rs 1,000 in order to lower the barrier for entry from the Rs 2 lakh level that was in place until now, with the aim of increasing retail participation on the Social Stock Exchange (SSE).

The reduced threshold of Rs 1,000 allows small investors to participate in SIFs, which are Alternative Investment Funds (AIFs) focusing on social or environmental impacts.

The SEBI amended AIF regulations to enable this change. This would align the minimum application size requirement for subscribing to zero-coupon zero principal instruments under its ICDR (Issue of Capital and Disclosure Requirements) Regulations, 2018, with the minimum investment value requirement for individual investors in the Social Impact Fund.

The move intends to increase capital flow for Not-for-Profit Organisations (NPOs) and social enterprises listed on the NSE and BSE Social Stock Exchange.

The SEBI has amended AIF regulations to enable this change, lowering the barrier for entry from the previous mandatory Rs 2 lakh minimum.

By slashing the requirement, the capital markets regulator aims to make impact investing a “democratised” space, similar to retail equity investing, enabling broader participation in funding social causes. This initiative is part of broader SEBI efforts to strengthen the SSE ecosystem, which also includes easing registration norms for NPOs.

The 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,” according to a SEBI statement.

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, the 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.

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

The SEBI also lowered the minimum subscription requirement for zero-coupon zero-principal instruments to 50 per cent from 75 per cent 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, the SEBI said.

IANS