In the realm of social finance, Zero Coupon Zero Principal (ZCZP) instruments have come out as a unique tool for the philanthropic growth. ZCZPs are designed for fundraising by eligible Not-for-Profit Organisations (NPOs) through the Social Stock Exchange (SSE). Unlike traditional zero-coupon bonds, ZCZP instruments do not provide interest payments or principal repayment and are intended to facilitate philanthropic contributions towards social projects.
Zero Coupon Zero Principal instruments are issued by Not-for-Profit-Organisations (NPOs) with an objective to make donations transparent. These instruments are neither a loan nor stocks, indicating a Social ROI and allowing donors to finance specific projects via a regulated exchange.
Key Takeways
- ZCZP instruments enable NPOs to raise funds through the Social Stock Exchange.
- Investors do not receive interest payments or principal repayment.
- The minimum issue size is ₹50 lakh and the minimum application size is ₹1,000.
- A minimum subscription of 75% of the issue size is required.
- Eligible companies can use ZCZP instruments for certain CSR activities under the 2026 CSR rules.
What are Zero Coupon Zero Principal (ZCZP) Instruments?
Completely different from standard bonds acting as a loan, ZCZP instruments act as a standard donation. Whenever an individual purchases these instruments, they are making a philanthropic contribution that can be tracked through the disclosure and reporting framework of the Social Stock Exchange.
NPOs can raise funds through these instruments and list them on the Social Stock Exchange, subject to compliance with SEBI regulations and SSE requirements. NPOs typically obtain funds from individuals and businesses through donations or corporate social responsibility (CSR) programs. These assets are available on social stock exchanges for those who wish to assist NPOs.
Key Features of ZCZP Instruments
- ZCZP instruments have a bond-like structure. When a typical bond matures, the issuer is obligated to pay principal and interest. However, the issuing body is not required to pay interest (zero coupon) or return principal (zero principal) because ZCZP instruments are offered by organisations looking for donations rather than loans.
- Projects funded through ZCZP instruments must be undertaken within the timelines disclosed in the fundraising document and in accordance with the applicable SSE framework.
- ZCZP instruments are issued only in dematerialised form and are not transferable from the original subscriber until the expiry of their tenure.
- Under the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026, eligible companies may undertake certain CSR activities through ZCZP instruments issued by registered NPOs, creating an additional funding channel for social projects.
Also Read About: What are Alternative Investment Funds?
How to Issue ZCZP Instruments?
NPOs can raise funds that are listed on the social stock exchange by following the process mentioned below:
Public Issue
- Demat: All instruments must be in dematerialised form.
- Investment Limits: The minimum issue size is ₹50 lakh, with a minimum application size of ₹1,000.
- Subscription Requirement: A minimum subscription of 75% of the proposed issue size must be achieved. If subscriptions fall below 75%, the funds must be refunded to applicants. Where subscriptions are between 75% and 100% of the proposed issue size, the NPO must disclose how any funding shortfall will be addressed.
Also Read About: What is Dematerialization?
Private Issue
- NPOs registered on the SSE may choose the private issue route for Zero Coupon Zero Principal (ZCZP) Instruments to Social Impact Fund(s), which are registered under the applicable provisions of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations 2012.
- The rules for public issue shall mutatis mutandis (with necessary changes) apply to private issue.
Also Read About: Securities and Exchange Board of India (SEBI)
Conclusion
ZCZP instruments brought a landmark shift in how social projects are financed in India. With the introduction of NPOs on a regulated exchange, it invoked a layer of transparency in traditional philanthrophy.
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