The SEBI Board has approved a wide-ranging set of reforms aimed at enhancing operational efficiency, reducing compliance burdens, and democratising social investments — during the SEBI Board Meeting
A landmark decision involves reducing the minimum investment for individual investors in Social Impact Funds (SIFs) from ₹2 lakhs to just ₹1,000, effectively opening the sector to mass retail participation. To boost market liquidity, SEBI approved net settlement for Foreign Portfolio Investors (FPIs) in the cash market, set for implementation by December 31, 2026. The Board also introduced flexibility for Alternative Investment Funds (AIFs) to retain liquidation proceeds post-tenure for tax or litigation demands and established an "inoperative funds" tag for entities with no active management. Additionally, a stringent new Conflict of Interest framework was institutionalized for SEBI members and officials, including the establishment of an Office of Ethics and Compliance (OEC).
Key Board Decisions and Regulatory Amendments
Social Impact Investing: The drastic reduction in SIF entry barriers aligns with the requirements for Zero Coupon Zero Principal (ZCZP) instruments, fostering an inclusive social stock ecosystem.
FPI Operational Efficiency: Netting of funds for outright cash market transactions will reduce funding costs for foreign investors, while securities settlement remains on a gross basis.
Infrastructure Trusts (InvITs/REITs): New amendments permit privately listed InvITs to invest up to 10% in greenfield projects and allow highly leveraged trusts (49%-70%) to borrow for essential maintenance and debt refinancing.
Intermediary Governance: The "Fit and Proper Person" criteria were revised to allow for case-by-case disqualification hearings, balancing regulatory oversight with the ease of doing business.
Internal Ethics: Senior SEBI officials must now publicly disclose immovable property details, while all employees are subject to uniform restrictions on trading and single-intermediary investment limits.
AIF Liquidation: Amendments to the 2012 Regulations allow schemes to handle "tail-end" portfolio proceeds more effectively without achieving a NIL bank balance for registration surrender.
What is "Net Settlement" for FPIs? Net settlement is a clearing mechanism where only the difference between total buy and sell obligations is transferred between parties at the end of a trading day. It acts as a catalyst for capital efficiency by significantly reducing the amount of idle cash Foreign Portfolio Investors must maintain in their accounts. While securities continue to be settled on a gross basis to ensure delivery, the netting of funds manifests as a transition toward global best practices in high-frequency trading environments. This move is a primary lever for attracting foreign capital into the Indian cash market, streamlining the delivery of liquidity while maintaining the safety of the underlying asset transfer.
What are Social Impact Funds (SIFs)? Social Impact Funds (SIFs) are a specialized category of Alternative Investment Funds (AIFs) regulated by SEBI that invest in social enterprises or "not-for-profit" organisations. Unlike traditional commercial funds, SIFs prioritize generating a measurable social or environmental impact alongside a financial return. A defining feature of SIFs in India is their ability to issue Zero Coupon Zero Principal (ZCZP) instruments, which allow for capital to be raised for social projects where the "return" is the social outcome rather than interest or dividends. To democratise this sector, SEBI has slashed the minimum investment threshold for individuals from ₹2 lakhs to ₹1,000, specifically to encourage mass retail participation. This move benchmarks a trajectory toward an inclusive "Social Stock Exchange" ecosystem, enabling everyday citizens to fund grassroots organizations with the same ease as buying a mutual fund.
Policy Relevance: Anchoring Trust and Inclusion in Capital Markets
Institutionalizes a Framework for Retail Inclusion: Reducing the SIF threshold to ₹1,000 benchmarks India’s trajectory in democratizing finance, allowing everyday citizens to contribute to social goals previously reserved for high-net-worth individuals.
Mechanically Bridges the Compliance Gap: The "inoperative funds" tag for AIFs serves as a cornerstone of the Ease of Doing Business mission, ensuring that dormant entities are not burdened by redundant reporting requirements.
De-risks the Environment for Infrastructure: Allowing InvITs to borrow for capital expenditure and maintenance even at high leverage future-proofs the 1.37 lakh ckm of transmission lines and parks envisioned in national energy plans.
Signals a Paradigm Shift in Ethics: Establishing the Office of Ethics and Compliance (OEC) streamlines the delivery of institutional integrity, ensuring that regulators are held to the same transparency standards as the entities they oversee.
Solidifies India’s Standing as an Investment Destination: The alignment of FPI settlement and "Fit and Proper" criteria with global norms acts as a primary lever for attracting the foreign capital needed to reach a $130 billion pharma market and $22 trillion energy vision.
Relevant Question for Policy Stakeholders: How will the Social Stock Exchange measure the impact of the ₹1,000 retail entry point on the total corpus available for grassroots NGOs and social enterprises?
Follow the Full Press Release Here: SEBI: Key decisions taken in the Board Meeting - 23 March 2026
