The Ministry of Corporate Affairs has significantly expanded the Corporate Social Responsibility framework by widening the ambit of Schedule VII to include subscription to zero coupon zero principal instruments on Social Stock Exchange. According to the latest MCA notifications G.S.R. 415(E) and G.S.R. 416(E) dated 27 May 2026, this amendment represents a major shift in India's CSR architecture by connecting company law, securities regulation, CSR governance, and social-sector funding. As per the Press Release Page by PIB Delhi, this expansion is in line with the vision of Viksit Bharat and aims to provide significant ease of compliance to companies while helping Not for Profit Organisations raise funding for public welfare projects in a transparent and regulated manner. According to Sriram Krishnan, chief business development officer at the National Stock Exchange (NSE), this is a significant step for India's social sector, enabling corporates to deploy CSR funding through a transparent, regulated and impact-driven platform.
Under the new amendments, companies are permitted to use zero coupon zero principal instruments as long as their spending through such instruments does not exceed 10% of their total CSR expenditure for a financial year. The Press Release Page by PIB Delhi confirms that expenditure incurred by the CSR mandated companies for such instrument shall not exceed ten percent of the total Corporate Social Responsibility expenditure for that financial year. The amendment introduces Rule 4A in the CSR Policy Rules, 2014, which enumerates the criteria for Corporate Social Responsibility implementation through zero coupon zero principal instruments. Companies will not be required to undertake impact assessment for projects funded through these instruments, streamlining the CSR compliance process while the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 provide that existing provisions of rule 4, except sub-rules (5) and (6), shall be applicable to the implementation of CSR through zero coupon zero principal instruments.
A zero coupon zero principal instrument is a unique fundraising instrument within the Social Stock Exchange ecosystem that does not offer interest or return the principal amount, unlike traditional bonds. According to the MCA notification, non-profit organisations issuing these instruments must undertake projects with a duration not more than three succeeding financial years from the issue of such instruments. If any amount remains unspent after the termination of listing, the balance must be transferred to funds specified under Schedule VII of the Companies Act. As per the Press Release Page by PIB Delhi, these Not for Profit Organisations will be able to issue Zero Coupon Zero Principal Instrument on the Social Stock Exchange (SSE) in accordance with the Securities and Exchange Board of India's Regulations. The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 further provides that existing provisions of rule 4, except sub-rules (5) and (6), shall be applicable to the implementation of CSR through zero coupon zero principal instruments.
Prior to these amendments, companies could only fulfill their CSR obligations through more traditional routes including directly by the company itself, through a registered trust, via government-established entities, and other established methods. The introduction of zero coupon zero principal instruments represents a significant expansion of CSR funding mechanisms, providing companies with additional flexibility in meeting their social responsibility obligations. According to the Press Release Page by PIB Delhi, this amendment is aimed at providing significant ease of compliance to the companies and will also help Not for Profit Organisations raise funding for public welfare projects in a transparent and regulated manner. The legal framework for Corporate Social Responsibility has been provided under Section 135 of the Companies Act, 2013, Schedule VII of the Act, and Companies (Corporate Social Responsibility Policy) Rules, 2014, which are aligned with national priorities to promote inclusive and sustainable development.
The amendment is expected to boost fundraising activity and participation on the Social Stock Exchange, creating new opportunities for non-profit organisations to access corporate funding. According to Manpreet Singh, Partner and Sustainability Practice Leader at Grant Thornton Bharat, India Inc spends close to ₹35,000 crore annually on CSR, and even a modest share of that routed through a listed and regulated platform could create the kind of demand the exchange has lacked so far. Companies spent ₹34,909 crore on CSR activities in 2023-24, as per the latest official data. As per Sandeepp Jhunjhunwala, Partner at Nangia Global Advisors, the framework creates a more credible and governance-driven channel for CSR deployment, though supply of quality issuances may struggle to keep pace with demand. Anshul Jain, Partner-regulatory at PwC India, noted that the move helps in furtherance of a transparent and credible mode of funding CSR projects by the companies and enables social enterprises to access a wider pool of capital. The Social Stock Exchange framework was first proposed by Finance Minister Nirmala Sitharaman in the Union Budget for financial year 2019-20 as an electronic fundraising platform for social enterprises under the regulatory oversight of markets regulator Securities and Exchange Board of India (Sebi). Currently, 90 social enterprises are registered on the NSE's social stock exchange platform, with stakeholders having sought regulatory clarity on allowing CSR funds to be routed through SSE instruments.
