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Zero coupon, zero principal bond

Posted on July 19, 2022 by admin1  4078

In News

  • Recently, the Finance Ministry has declared zero coupon zero principal instruments (ZCZP) as securities for the purposes of the Securities Contracts (Regulation) Act, 1956.

About

  • It will help many organisations including corporates to utilise their fund marked for social responsibility and also help non-profit organisations to get funds in a more transparent manner. 

Zero coupon Zero principal instrument 

  • Zero coupon zero principal instrument means an instrument issued by a Not for Profit Organisation (NPO) which will be registered with the Social Stock Exchange (SSE) segment of a recognised stock exchange.
    • The Social Stock Exchange (SSE) is a novel concept in India and such a bourse is meant to serve private and non-profit sector providers by channelling greater capital to them. 
    • The idea was floated by Finance Minister Nirmala Sitharaman in her Budget Speech 2019-20.
      • SSE will be a separate segment of the existing stock exchanges.
      • Social enterprises eligible to participate in the SSE should be entities — NPOs and for-profit social enterprises — having social intent and impact as their primary goal.
  • These instruments will be governed by rules made by the Securities and Exchange Board of India (Sebi)

Zero-coupon bond

  • It is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.

Source:ET

 
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