Non-profit organisations (NPOs) and for-profit social enterprises (FPEs) — entities wedded to social causes — will now be able to plug into the capital markets.

The Securities and Exchange Board of India (Sebi) has permitted these charitable entities to raise funds through the flotation of equity, tap mutual funds and issue a variety of bonds including zero-coupon zero principal bonds and development impact bonds.

The regulations relating to these new instruments will need to be framed.

These enterprises will also be permitted to raise funds through social impact funds that will operate under Sebi (Alternative Investment Funds) Regulations. The social impact funds will need to have a corpus of Rs 5 crore.

The board of the market regulator also cleared plans to establish a social stock exchange (SSE) where these entities will be listed.

The SSE will be a separate segment of the existing stock exchanges.

In a media release issued after the board meeting, Sebi said the social enterprises would have to engage in activity out of a list of 15 eligible social activities to be approved by the regulator.

The move comes at a time when the financial system is awash with funds as a result of an accommodative monetary policy.

The entities will have to demonstrate social intent by working with underserved or less privileged populations and regions and display impact on the ground.

The social enterprises will need to immerse themselves in work related to eradicating hunger, poverty, malnutrition and inequality and promoting health care, including mental health, and sanitation.

Other areas include making safe drinking water available; promoting education, employability and livelihoods; furthering gender equality, empowerment of women and LGBTQIA communities; and ensuring environmental sustainability.