The Social Stock Exchange (SSE) framework was introduced to expand fundraising avenues for social enterprises through regulated capital market infrastructure. While a significant step in the evolution of social finance in India, participation remains low. This article examines key regulatory and structural constraints affecting utilisation of the SSE and suggests practical reforms to improve adoption and market relevance.
First proposed in the Union Budget 2019-20, the Securities and Exchange Board of India (SEBI) introduced the Social Stock Exchange (SSE) framework in 2022 to provide a fund-raising platform for social enterprises[1]. The objective was to bridge the financing gap by enabling alternative fund-raising instruments through capital markets for achieving socio-development goals.
The SSE operates as a separate segment of a recognised stock exchange, rather than as a standalone exchange. While India has over 2.65 lakh active NGOs registered with the NGO Darpan database[2], as of May 2026 fewer than 100 are registered on each of the National Stock Exchange[3], and the BSE[4], of which fewer than 20 are listed[5], figures that are indicative of the significant underutilisation of SSE framework.
Recognising this, the Indian Government has in the recent past introduced several relaxations to widen access to SSEs with SEBI inter alia expanding the eligibility criteria[6] for being identified as a Social Enterprise[7], increasing the timeline of validity of registration[8], decreasing the minimum investment amount[9], permitting retail investors[10]. Recent amendments to the Companies Act, 2013 also qualify investments in Zero Coupon Zero Principal instrument (ZCZP) of NPOs listed on the SSE as CSR expenditure[11]. Despite these efforts, participation remains limited, suggesting that additional gaps remain to be addressed.
Operational costs as Barrier
The SSE framework is, justifiably, built around transparency and credibility. While these are among its key strengths, they also create barriers to entry. Under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, every entity registered or listed on an SSE is subject to substantial compliance obligations. These include, inter alia: (i) periodic disclosures covering financial and non-financial aspects, and quarterly disclosures on funds raised, utilised, and unutilised; and (ii) an annual impact report independently assessed by a registered social impact assessor.
Preparing the annual impact report is resource-intensive exercise requiring, inter alia, field visits, output monitoring, beneficiary surveys and interviews. This burden is compounded by the limited availability of qualified social impact assessors in India. Only approximately 1,000 social impact assessors are enrolled across organisations such as the Institute of Social Auditors of India under ICAI, the ICSI, and the Institute of Cost and Management Accountants of India[12].
These requirements mean that enterprises may need support from legal counsel, accountants, and other advisers before using the platform effectively, which can be both costly and time-consuming, particularly for modest fund-raising exercises, where compliance costs may be disproportionate to the amount raised.
Structuring Constraints
Additionally, larger impact funds, private equity, and venture capital investors looking to invest in for-profit enterprises (FPEs) carrying the ‘social enterprise’ identifier must navigate a regulatory architecture that imposes precise and inflexible eligibility thresholds, with material implications for deal structuring.
The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 prescribe that an FPE must ensure that at least 67% of its activities, measured by a 3-year average of revenues, expenditure, or customer or beneficiary base, qualify as eligible activities directed at underserved or underprivileged target populations.
This threshold does not adequately account for FPEs in capital-intensive sectors such as affordable healthcare, clean energy, education, agriculture, or financial inclusion, where commercial revenue may cross-subsidise social impact. Strict application may exclude enterprises whose business models are otherwise substantively aligned with SSE objectives.
Proposed Solutions – Tiered Compliance Framework and Regulatory Support
The challenges identified above — high compliance costs, rigid eligibility thresholds for FPEs, and the absence of a complete SSE-CSR nexus — call for coordinated action across SEBI and the Ministry of Corporate Affairs . We propose reforms across 3 areas.
First, in our view, a scale-based compliance framework should be introduced based on the ticket size of the fund raise. Smaller NPOs raising funds below a prescribed threshold through ZCZP instruments could be subject to simplified annual impact report requirements, standardised disclosure formats, and lighter audit obligations. By contrast, entities raising above a material threshold would remain subject to fuller disclosure, governance, and audit requirements.
Second, while the eligibility threshold for FPEs serves an important gatekeeping function, as a bright-line rule it may exclude enterprises with hybrid models which meaningfully deliver social impact. A more workable approach would be to retain the threshold as the default while permitting alternative qualification routes — such as satisfaction of prescribed criteria across a combination of revenue, expenditure, and beneficiary metrics, or eligibility at the level of a ring-fenced social vertical or project, subject in each case to enhanced disclosures and impact reporting. This would preserve the credibility of the SSE framework while improving access for enterprises aligned with social outcomes.
Third, regulatory relaxation alone may not be sufficient. Many smaller social enterprises may be formally eligible but lack the governance systems, reporting infrastructure, and internal resources to comply with a disclosure-heavy platform. Standardised templates, onboarding support, and capacity-building measures would therefore complement any compliance rationalisation and improve participation.
Conclusion
The Indian Government is clearly moving in the right direction. The operationalisation of the SSE and the subsequent relaxations introduced to widen access reflect their policy commitment to building a credible social finance ecosystem in India.
However, if the SSE is to achieve meaningful scale, further reforms will be required. The framework must become more proportionate in its compliance expectations and more commercially workable for FPEs and their investors. Given SEBI’s demonstrated willingness to refine the framework over time, there is reason to be optimistic that these issues will continue to receive attention and that the SSE will develop into a more effective and inclusive platform.
