Daily News Analysis

Zero coupon zero principle

stylish_lining

Context: Capital markets regulator Sebi on Thursday came out with a procedure for public issuance of 'zero coupon zero principle' instruments by not-for-profit organisations (NPOs) and listing of such instruments on the Social Stock Exchange (SSE).

News:

  • Instruments issued in dematerialized form are non-transferable.
  • The minimum issue size for such instruments is set at Rs 50 lakh, with a minimum application size of Rs 10,000.
  • A minimum subscription of 75% of the proposed funds must be achieved for the issuance.
  • The process for listing on the SSE involves filing a draft fundraising document with the SSE through the lead manager, seeking in-principle approval for listing.
  • SSE provides observations on the draft document within 30 days, and NPO incorporates these observations before opening the issue.
  • If the subscription is less than 75% of the issue size, funds will be refunded.
  • SSE is responsible for maintaining details of allotment for zero coupon and zero principal instruments issued by an NPO.
  • SSE sets additional norms for the issue procedure, including agreements with depositories, banks, duration for public issuance, allocation methodology, and other ancillary matters.

'Zero Coupon Zero Principal' instruments

  • They are financial tools utilized by non-profit organizations for fundraising.
  • When these securities are issued, the funds raised are considered donations rather than loans.
  • The issuing entity is not obligated to pay interest (zero coupon) or repay the principal amount (zero principal).
  • Similar to other debt instruments, these securities have a specific time duration.
  • The securities can be purchased by individuals or corporations through SSE when available.
  • The Finance Ministry has categorized zero coupon zero principal instruments (ZCZP) as securities under the Securities Contracts (Regulation) Act, 1956.
  • SEBI governs the rules and regulations pertaining to these instruments.
  • The significance lies in enabling organizations and corporations to use their social responsibility funds more transparently and support non-profit organizations effectively.

SEBI

  • It was established in 1988, is the regulatory authority for India's securities and commodities market, operating under the ownership of the Finance Ministry.
  • Its primary objectives include safeguarding investors' interests and fostering the development of the securities market.
  • SEBI gained autonomy and statutory status with the enactment of the SEBI Act in 1992.
  • Functioning as a quasi-judicial and quasi-legislative body, SEBI possesses the authority to formulate regulations, conduct investigations, and impose penalties.
  • The SEBI Board comprises a Chairman serving a 3-year term, along with various Full-time and Part-time members.
  • NPOs, or non-profit organizations, are legal entities that operate for the public and societal benefit rather than for profit.

SSE

  • Social Stock Exchanges(SSE), constitutes a distinct segment within the existing stock exchange structure.
  • It serves as a platform for social enterprises to raise funds from the public through its designated mechanism.
  • The proposal for establishing SSE was introduced by Finance Minister Nirmala Sitharaman in the 2019 budget speech.
  • Eligibility for listing on SSE is open to both for-profit social businesses (FPSE) and non-profit organizations (NPO) that demonstrate a commitment to social causes.
  • SEBI's Regulations of 2018 outline 17 reasonable criteria for qualification, including objectives related to education, employability, equality, environmental sustainability, and efforts to combat hunger, poverty, and malnutrition.

Collegium System of Judicial Appointments in India

The Collegium system refers to India's judicial process for appointing and transferring judges to the Supreme Court and High Courts. While the system plays a crucial role in maintaining judici
Share It

Sea-Level Rise

Coral micro-atolls are essential natural recorders of sea-level rise (SLR), offering valuable insights into past and present oceanic changes. These disk-shaped coral colonies provide a unique meth
Share It

India’s Strategy in the Indian Ocean

Why the Indian Ocean Matters: Strategic Importance: The Indian Ocean is the third-largest ocean in the world, hosting 1/3rd of the global population and acting as a crucial maritime trade
Share It

ASEAN Centrality

Why in the News? ASEAN’s central role in the Indo-Pacific is increasingly under strain due to rising great-power rivalry, shifting global trade dynamics, and the evolving regional order.
Share It

2025 SCO Summit in Tianjin

The 25th Shanghai Cooperation Organization (SCO) Summit held in Tianjin, China in 2025 brought together the heads of state of member countries to address a broad spectrum of issues, including secu
Share It

India’s Carbon Emissions Trading System

The Ministry of Environment, Forest and Climate Change (MoEFCC) has made a significant stride in India’s climate strategy by setting up the National Designated Authority (NDA) to implement a
Share It

Jan Vishwas (Amendment of Provisions) Bill, 2025

The Jan Vishwas (Amendment of Provisions) Bill, 2025 was introduced in the Lok Sabha to amend various provisions across several central acts with the goal of decriminalizing offences and promoting
Share It

Fair and Representative Global Order

India’s External Affairs Minister recently called for a fair and representative global order during the BIMSTEC Traditional Music Festival. The statement highlights the growing need for reforms
Share It

India's First EMI-Based Credit Card

Recently, Unity Small Finance Bank and BharatPe launched India's first EMI-driven credit card on the RuPay network. This innovative product allows users to pay for their purchases in full or c
Share It

Civil Society Organizations (CSOs)

Why in News? Civil Society Organizations (CSOs) have gained prominence for their vital role in promoting collective action, protecting rights, and filling gaps in governance. They serve as cata
Share It

Newsletter Subscription


ACQ IAS
ACQ IAS