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Taking a step to ease the fundraising by not-for-profit organisations, capital markets regulator SEBI on Tuesday proposed flexibility in the regulatory framework for social stock exchanges.

Under the proposal, the regulator has suggested reducing the threshold of the minimum issue size as well as application size for not-for-profit organisations (NPOs).

Additionally, it has suggested abolishing the requirement of no pending notice or ongoing scrutiny by Income Tax against NPOs for registration on social stock exchanges (SSEs) and substituting the term social auditor with social impact assessor.

Further, NPOs should be permitted to provide past social impact but not strictly as per the format specified by SEBI in their fundraising document, according to a consultation paper.

The proposals are aimed at facilitating fundraising by NPOs.

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A not-for-profit organisation (NPO) is required to be registered with the SSE to raise funds. At present, 31 NPOs have been registered in this segment with the two exchanges.

The Securities and Exchange Board of India (SEBI) has sought comments from the public till September 19 on the proposal.

In its consultation paper, the regulator has suggested reducing the threshold of the minimum issue size for NPOs, issuing Zero Coupon Zero Principle (ZCZP) instruments to Rs 50 lakh from the existing Rs 1 crore.

Also, it has proposed to lower the minimum application size in the public issue of ZCZP to Rs 10,000 from the current level of Rs 2 lakh.

Further, it has been recommended to allow certain entities to be registered as NPOs with SSE. Those entities are universities or educational institutions existing solely for educational purposes and not-for-profit and which are financed by the government and body or trust set up by the government for regulating any activity for the benefit of the general public.

The idea of a social stock exchange was first mooted in the Union Budget 2019-20 to enable entities involved in social activities such as charitable trusts and non-profit organisations to access the capital market for funds. The regulatory framework for SSE was prescribed by SEBI in 2022.