Social Stock Exchange

Context: Recently, the National Stock Exchange of India received final approval from the markets regulator Securities and Exchange Board of India (SEBI) to set up a Social Stock Exchange (SSE).

About Social Stock Exchange:

• Social Stock Exchange(SSE) is a platform that allows investors to invest in select social enterprises or social initiatives.
• The Union Budget ( 2019 –20 )proposed to initiate steps for creating a stock exchange under the market regulator’s ambit.
• SEBI constituted a group under the chairmanship of Tata group veteran Ishaat Hussain in 2019.
• In 2020, SEBI again set up the Technical Group(TG) under Harsh Bhanwala, ex-Chairman, NABARD for getting further expert advice and clarity on SSE.
• The Social Stock Exchange (SSE) is a novel concept in India and such a course is meant to serve private and non-profit sector providers by channeling greater capital to them.
• Global Examples: SSE exists in countries such as Singapore, and the UK among others. These countries allow firms operating in social sectors to raise risk capital.

Objectives:

• The SSE would function as a separate segment within the existing stock exchangeand help social enterprises raise funds from the public through its mechanism.

Salient Features: 

• Retail investors can only invest in securities offered by for-profit social enterprises (SEs) under the Main Board.
• In all other cases, only institutional investors and non-institutional investors can invest in securities issued by SEs.

Eligibility: 

• Any non-profit organization (NPO) or for-profit social enterprise (FPSEs) that establishes the primacy of social intent would be recognized as a social enterprise (SE), which will make it eligible to be registered or listed on the SSE.
• NPOs can raise money either through the issuance of Zero Coupon Zero Principal (ZCZP) Instruments from private placement or public issue, or donations from mutual funds.

About Zero Coupon Zero Principal (ZCZP) Instruments :

• These are issued by a Not-for-Profit Organisation (NPO) which will be registered with the Social Stock Exchange (SSE) segment of a recognized stock exchange.
• The Finance Ministry has declared zero coupons zero principal instruments (ZCZP) as securities for the purposes of the Securities Contracts (Regulation) Act, 1956.
• These instruments will be governed by rules made by the Securities and Exchange Board of India (SEBI)

About Zero-coupon bond:

• It is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full-face value.
• The difference between the purchase price of a zero-coupon bond and the par value indicates the investor’s return.

Source: THE HINDU

Previous Year Questions

Q.1) With reference to the Indian economy, what are the advantages of “Inflation-Indexed Bonds (IIBs)”? (2022)

1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIGs provide protection to investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.

Which of the statements given above is correct?

1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3

Q.2) Convertible Bonds, consider the following statements: (2022)

1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2