ISLAMABAD: To ensure a more conducive regulatory framework, the Securities and Exchange Commission of Pakistan (SECP) has proposed amendments to the Non-Banking Finance Companies (Establishment & Regulations) Rules 2003 to solicit public feedback.

       The proposed changes are based on a comprehensive review of the regulations, considering the advancements in the NBFC ecosystem and the effectiveness of mandatory approval requirements.

       The modifications include the removal of approval processes for the rate of profit on subordinated loans and the repayment of subordinated loans.

       While the provision mandating the application for a licence within six months of the rules’ notification has been omitted being obsolete.

       The necessity for the submission of an undertaking by the company’s promoters or majority shareholders for the sale or transfer of shares without prior approval from the Commission has been eliminated as it is no longer deemed necessary.

       The requirement for furnishing evidence of qualifications and experience for individuals occupying “executive positions, research, or other related functions” within both existing and new companies is considered excessive and has been omitted.

       As technological advancements have been achieved to a considerable level within financial services, the SECP has said that digital-specific licencing requirements have been introduced for lending and microfinance services through digital channels including mobile applications.

       The other additional requirements include identifying major shareholders and funding sources and providing an undertaking on fund sources.

       The rules once amended will require an NBFC to maintain membership in the relevant microfinance association, while providing a conducive environment Schedule-I has been amended, allowing existing company(s) an opportunity to convert to an NBFC.

       Published in Dawn, January 14th, 2024