Sebi Plans To Lower Minimum Investment In Social Impact Funds To Rs 1000 From Existing Rs 2 Lakh - Who Should Invest?

The Securities and Exchange Board of India (Sebi) proposed to cut the minimum investment amount for individual investors in Social Impact Funds (SIFs) to Rs 1,000 from the existing Rs 2 lakh, in a bid to widen participation and strengthen the Social Stock Exchange (SSE) framework.

In a consultation paper released on February 9, the market regulator said, “Based on the deliberations held with the SSEAC, it is proposed to reduce the minimum value of investment by individual investors in SIFs from rupees two lakh to rupees one thousand” .

At present, SIFs, classified as Category I Alternative Investment Funds (AIFs), require a minimum investment of Rs 2 lakh from individual investors if they invest only in securities of not-for-profit organisations (NPOs) listed or registered on the SSE. Sebi now plans to lower this limit to Rs 1,000.

What is Sebi’s Rationale Behind Its Proposal

According to Sebi, the review was undertaken in consultation with the Social Stock Exchange Advisory Committee (SSEAC) as part of efforts to further strengthen the SSE framework, ease fundraising, and encourage wider participation by both investors and social enterprises .

By lowering the minimum investment limit, Sebi hopes to bring retail investors into structured impact investing, rather than limiting participation to high-net-worth individuals.

“The proposed reduction in the minimum value of investment would enable the SIFs to attract small investors to invest in the securities of the NPOs through the SIF,” Sebi said .

Explaining the rationale, the regulator said the proposal is intended to align the AIF regulations with the norms governing Zero Coupon Zero Principal (ZCZP) instruments on the SSE. Sebi noted that the minimum application size for ZCZP instruments was earlier Rs 2 lakh but was reduced to Rs 1,000 in March 2025 to boost investor participation.

Akshat Garg, Head of research & product at Choice Wealth, told Outlook Money: “Sebi’s proposal to cut the minimum investment in Social Impact Funds to Rs 1,000 is a sensible and timely move. It makes impact investing far more accessible and allows small investors to participate in structured social initiatives rather than only donating informally,” he said.

Extension of NPO Registration Period on SSE

Apart from lowering the minimum investment limit, Sebi also proposed to extend the registration period for NPOs on the SSE to three years from the current two years, if they are not raising funds during that period.

As per existing rules, an NPO can remain registered on the SSE for a maximum of two years without fundraising. Sebi said practical challenges, such as delays in renewal of Income Tax registrations and other statutory approvals, often slow down fundraising plans.

Based on SSEAC’s recommendations, Sebi said the registration period may be extended by one additional year, subject to approval by the SSE, to address these operational hurdles.

Easier Fundraising via ZCZP Instruments

Sebi also proposed to reduce the minimum subscription requirement for issuance of ZCZP instruments to 50 per cent from 75 per cent for certain projects.

The regulator clarified that this relaxation would be applicable only to projects where costs and outcomes can be proportionately allocated on a “per unit” basis. The idea is to ensure that even if a project is partially subscribed, the funds raised can still be meaningfully deployed without compromising implementation.

Sebi said the SSEs would be required to carry out appropriate due diligence before allowing fundraising at the lower threshold, to ensure feasibility and alignment with stated social objectives .

What Is a Social Impact Fund

A Social Impact Fund, introduced in India in July 2022, is a Sebi-regulated, privately pooled investment vehicle that primarily invests at least 75 per cent in unlisted securities of social ventures and social enterprises and may also issue social units (units that provide only social returns). This means that SIFs can invest in non-profit organisations as well as for-profit enterprises.

Who Should Invest in Social Impact Funds

According to Garg, SIFs are best suited for investors who want their capital to create social outcomes alongside potential returns. “They should not be compared directly with regular diversified equity funds, as the objectives and time horizons are different. For first-time investors, the best approach is to begin with a small amount, understand the underlying projects and impact reporting, and view this as a supportive allocation alongside core market-linked investments,” he said.