Zero coupon, zero principal bond


    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.


    • 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.