If your NGO is looking at the Social Stock Exchange (SSE) for SSE funding, the instrument at the centre of it is the Zero Coupon Zero Principal (ZCZP) instrument. It is how a registered Not for Profit Organisation (NPO) raises grant money on the exchange for a defined social project. This explainer walks through what a ZCZP is, who can issue it, how an issue works, and the reporting that follows.
What is a Zero Coupon Zero Principal instrument?
A Zero Coupon Zero Principal (ZCZP) instrument is a security that a registered NPO issues on the SSE to raise funds. The name describes how it works: zero coupon means it pays no interest, and zero principal means the amount subscribed is not repaid at maturity. The subscriber receives no financial return; what they receive is a social return, tracked through the exchange. In practice, subscribing to a ZCZP instrument is effectively a structured donation: the money is committed to a specific project and its use is tracked rather than simply handed over.
SEBI has declared ZCZP instruments to be securities, which is what allows them to be issued and listed on the SSE under a regulated framework. This is the key difference between a ZCZP issue and an ordinary grant or donation: it runs through a SEBI-overseen process with disclosure and reporting attached.
Who can issue a ZCZP instrument?
Only an NPO that is registered on the Social Stock Exchange can issue ZCZP instruments. Registration is the gateway: an organisation first registers with the SSE as an NPO, and only then can it move to raising funds through an issue. Broadly, the eligible entity is a charitable trust, a society, or a Section 8 company that meets SEBI's eligibility conditions, including a minimum operating track record, valid tax registrations, and a defined level of past spending and funding. Political and religious organisations are excluded.
Registration and a ZCZP issue are two separate steps. We cover the eligibility and registration side in detail in SSE registration, and the fund-raising side in raising funds on the SSE.
How does a ZCZP issue work?
A ZCZP issue is tied to a specific project rather than to general funding. At a high level, the steps are:
Define the project: the NPO sets out the social objective, the activities, the target outcomes, and the amount it needs to raise. This becomes the basis of a fund-raising document filed with the SSE.
Open the issue: the ZCZP instrument is offered for subscription on the SSE, and donors or subscribers commit funds towards the stated project.
Meet the minimum subscription: the issue must reach a minimum subscription threshold for it to proceed (see the next section).
Use of funds: the money raised is ring-fenced for the stated project and used in line with the fund-raising document, not diverted to unrelated purposes.
Listing: the ZCZP instrument is listed on the SSE, which is the regulated venue through which the issue and its disclosures are tracked.
What is the minimum subscription rule, and the 50% relaxation?
An NPO cannot keep funds from a partly subscribed issue without a floor. The minimum subscription requirement is that floor: the share of the target amount that the issue must attract for it to go ahead. The baseline requirement is 75% of the amount the NPO set out to raise.
Under SEBI's circular dated 15 April 2026, this minimum subscription requirement of 75% may be reduced to 50%. The relaxation is not automatic: it is subject to the SSE's due diligence, taking into account the subscription scenario for the particular issue. The same circular also extended the validity of an NPO's registration on the SSE to up to three years. The consolidated rules sit in SEBI's Master Circular for the SSE framework dated 19 January 2026.
What reporting and social-audit obligations apply?
Raising funds on the SSE comes with ongoing accountability, which is part of what makes a ZCZP issue different from an off-exchange grant. At a high level:
Annual Impact Report: an NPO registered with or raising funds on the SSE is required to prepare an Annual Impact Report on its projects and outcomes.
Social audit: assessment by a registered Social Auditor is tied to projects that are listed or have raised funds, so a ZCZP issue brings the project within the scope of social-audit requirements.
Use-of-funds disclosure: the NPO reports how the raised funds are being deployed against the project set out in the fund-raising document.
These obligations are why a ZCZP issue is sometimes described as an SSE grant with strings attached: the funding is grant-like for the subscriber, but the issuer carries disclosure and audit duties through the exchange.
How does CSR money now flow into ZCZP?
A recent change widens the pool of funds that can reach a ZCZP issue. From 27 May 2026, the Ministry of Corporate Affairs added subscription to ZCZP instruments on the SSE to Schedule VII as an eligible Corporate Social Responsibility (CSR) activity. Companies can route up to 10% of their annual CSR obligation this way, and they are exempt from carrying out a CSR impact assessment for those projects. The issuing NPO must complete the funded project within three succeeding financial years and transfer any unspent amount to a Schedule VII fund, with a compliance report to SEBI. We cover this in detail in CSR via the Social Stock Exchange: the May 2026 MCA ZCZP update.
For an NGO, the takeaway is that a ZCZP issue can now draw on both individual or institutional donors and a slice of corporate CSR budgets, all through the same regulated instrument.
Sources
SEBI Master Circular for the framework on Social Stock Exchange (19 January 2026)
SEBI circular on NPO registration and minimum subscription for ZCZP instruments (15 April 2026)
This is a general explainer of how ZCZP instruments work on the Social Stock Exchange and is not legal or financial advice. Confirm the current position against SEBI's SSE framework, including the Master Circular dated 19 January 2026 and the circular dated 15 April 2026, and the relevant MCA notification, before acting.