The Government of India on July 16, 2022 declared the Zero-Coupon, Zero-Principal Instruments (ZCZPI) as securities that can be listed on particular exchanges.
Salient features of ZCZPI
- According to the gazette notification, ZCZPI is an instrument issued by a not-for-profit organisation that will be registered with the social stock exchange (SSE) segment of a recognised stock exchange in accordance with the SEBI regulations.
- In other words, ZCZPI are financial instruments that any non-profit organisation can use to raise funds.
- Usually, such organisations raise money through donations from individuals or corporates. Now, they can issue a ZCZPI through a social stock exchange (SSE) and those willing to donate money to their cause can buy these securities.
- With its ZCZPI structure, it resembles a debt security like a bond. When an organization takes a loan by issuing regular debt security like a bond, it has to make interest payments and the principal when the bond matures. But with ZCZPI, when an entity issues these securities and raises money, it is not a loan but a donation.
- The borrowing entity does not have to pay interest (zero coupon) and it does not have to pay the principal (zero principal) either.
- Like any other debt instrument, it will come with a time duration.
