UPSC Static Quiz – Economy : 24 November 2025

Solution: B

• The Zero Coupon Zero Principal (ZCZP) instrument is a novel innovation introduced with the operationalization of the Social Stock Exchange (SSE) in India, regulated by SEBI. It allows for a structured mechanism of donation.
• Statement 1 isincorrect. A defining feature of ZCZP instruments is that they are not tradable in the secondary market. Unlike regular bonds or shares where an investor can sell their holding to another party for profit or liquidity, ZCZP instruments are essentially donations disguised as financial securities. They are issued in dematerialized form to track the donation and the project’s progress, but they cannot be bought and sold on the stock exchange after issuance. They are intended to be held until the project tenure concludes or is terminated.
• Statement 2 iscorrect. The regulations specify that ZCZP instruments are exclusive to Not-for-Profit Organizations (NPOs) that are registered on the Social Stock Exchange. For-profit social enterprises (FPEs) have different avenues for raising funds, such as equity or debt, but they cannot issue ZCZPs. The ZCZP route is specifically designed to allow NPOs to access public funds with the transparency of a listed entity but without the financial obligation of repayment.
• Statement 3 iscorrect. The name “Zero Coupon Zero Principal” literally translates to “No Interest, No Principal Repayment.” The “investor” is effectively a donor who is funding a social project. The “return” on this investment is the social impact generated (e.g., number of trees planted, children educated), not monetary gain. Upon maturity, the principal is written off, not returned.

Solution: D

• Angel Funds are a distinct sub-category of AIFs designed to facilitate early-stage funding for startups. The regulations governing them are specific and differ from general Venture Capital rules.
• Statement 1 is incorrect. Angel Funds are classified under Category I AIFs, specifically as a sub-category of Venture Capital Funds. They are not Category II. Category I AIFs are those which are considered socially or economically desirable (like infrastructure, SME, and start-up funds) and are often accorded special tax status or pass-through benefits. Category II includes private equity and debt funds that do not fall under Category I or III.
• Statement 2 isincorrect. The lock-in period for investments made by Angel Funds is one year, not three years. This relatively short lock-in period is designed to provide flexibility to angel investors while ensuring that capital remains committed for a minimum viable period for the startup.
• Statement 3 isincorrect. While there was a previous limit of Rs. 10 Crores, the regulations have been amended to allow Angel Funds to invest up to  25 Crores in a single venture capital undertaking. This change was made to accommodate the growing financial needs of startups and to allow angel investors to support companies through later stages of growth (follow-on investments) without hitting a regulatory ceiling too early.

Solution: B

• SEBI introduced the beta version of the T+0 rolling settlement cycle in March 2024 to enhance market efficiency.
• Statement 1 isincorrect. The T+0 settlement cycle is currently optional and was launched as a beta version for a limited number of scrips (initially 25) and limited brokers. While there is a roadmap to expand it to the top 500, it is not yet mandatory for all of them. It runs as an optional parallel window.
• Statement 2 is correct. In the beta phase, to ensure smooth implementation, the T+0 mechanism was enabled only for non-custodian clients. Custodian clients, which include major institutional investors like Foreign Portfolio Investors (FPIs), were initially excluded from this beta phase due to the operational complexities of same-day confirmation and funds transfer for cross-border entities.
• Statement 3 iscorrect. The T+0 cycle does not replace T+1. It operates as an optional parallel segment. Investors can choose to trade in the T+1 window (standard) or the T+0 window (same-day settlement) for the eligible scrips.

Solution: A

• Commercial Papers (CPs) and Certificates of Deposit (CDs) are key short-term money market instruments.
• Statement 1 isincorrect. While CPs are issued by corporates, NBFCs, and AIFIs, the restriction on CDs is not accurate in the statement. CDs can be issued by Scheduled Commercial Banks and All-India Financial Institutions (AIFIs). The statement incorrectly limits CD issuance to only banks and RRBs. AIFIs like NABARD and SIDBI play a crucial role in the CD market as well.
• Statement 2 isincorrect. The minimum maturity for a Certificate of Deposit issued by a bank is 7 days. However, the minimum maturity for a Commercial Paper is also 7 days, not 15 days. Historically, CPs had different maturities, but current RBI directions harmonize the minimum tenor for both at 7 days.
• Statement 3 iscorrect. Under current RBI and SEBI guidelines, both Commercial Papers and Certificates of Deposit must be issued in dematerialized form. They cannot be issued as physical certificates anymore. Additionally, as negotiable instruments, they attract stamp duty.

Solution: A

• Statement 1 iscorrect. India’s Sovereign Green Bond Framework follows strict exclusion criteria to align with international standards. It explicitly excludes nuclear power generation and large hydropower plants (defined as those larger than 25 MW). It also excludes projects directly related to fossil fuel extraction or heating. This is done to ensure the “green” credentials of the bonds are not compromised by projects that have significant environmental trade-offs.
• Statement 2 isincorrect. “Greenium” (Green Premium) refers to the lower yield (lower interest rate) that an issuer pays on green bonds compared to regular bonds. It represents a cost saving for the issuer. Investors are willing to accept a slightly lower return (pay a higher price) for green bonds because of their mandate to invest in sustainable assets. It is not a penalty or higher yield demanded by investors; it is a benefit to the government/issuer.