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NSE Gets Sebi Nod to Set up Social Stock Exchange

One of the leading stock exchanges in India – The National Stock Exchange of India (NSE) received in-principle approval from the capital markets regulator Securities Exchange Board of India (Sebi) to set up a Social Stock Exchange (SSE) as a separate segment.

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What is Social Stock Exchange (SSE):

First floated by Finance Minister Nirmala Sitharaman in her Budget speech for the financial year 2019-20, SSE is a novel concept in India and the framework for this was notified in July this year based on the recommendations of a working group and technical group constituted by Sebi.
It is meant to serve the private and non-profit sectors by availing more capital to them. The union government issued a gazette notification declaring a new security ‘zero coupon zero principal‘ under the Securities Contracts (Regulation) Act, 1956.
  • An SSE allows the listing of non-profit or non-government organisations on stock exchanges, providing them with an alternative fund-raising structure.
  • Countries like the UK, Canada and Brazil have SSEs.
  • The fund-raising is proposed through several instruments such as zero-coupon-zero-principal bonds, social venture funds and mutual funds.

India’s Market Size:

India has over 31 lakh NPOs more than double the number of schools and 250 times the number of government hospitals which amount to one NPO for 400 Indians.

Eligibility criteria for SSE: About The New Rules:

  • Under the new rules, SSE will be a separate segment of the existing stock exchanges. Social enterprises that are eligible to participate in the SSE will have to be NPOs and for-profit social enterprises having social intent.
  • The social enterprises aspiring for SSE will have to engage in a social activity out of 16 broad activities listed by Sebi. The eligible activities include promoting healthcare, education, employability, and livelihoods; eradicating hunger, poverty, malnutrition, and inequality and supporting incubators of social enterprise and gender equality empowerment of women and LGBTQIA+ communities.

What Are The Constraints:

  • The entities not eligible under the present rules include corporate foundations, professional or trade associations, political and religious organisations, infrastructure and housing companies, except affordable housing.
  • As of now, Sebi permits the minimum issue size as Rs 1 crore and the minimum application size for subscription at Rs 2 lakh.

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