Islamabad, The Securities and Exchange Commission of Pakistan (SECP) has released a draft of proposed amendments to the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003, inviting public feedback. The proposed changes aim to refine the regulatory environment for the non-banking finance (NBFC) sector.

According to Press Information Department, these amendments are the outcome of a comprehensive review of the existing regulations, taking into account the evolution of the NBFC ecosystem and the relevance of certain mandatory approval requirements. Key modifications include the removal of approval processes for profit rates on subordinated loans and their repayment. Moreover, an obsolete provision requiring the application for a license within six months of the Rules’ notification has been discarded.

The draft also proposes the elimination of the requirement for company promoters or majority shareholders to submit an undertaking for share sale or transfer without the Commission’s prior approval. This change reflects a shift in regulatory perspective, deeming such undertakings unnecessary. Additionally, the requirement for evidence of qualifications and experience for individuals in executive positions, research, or related functions is considered excessive and has been omitted.

In recognition of technological advancements in financial services, the amendments introduce specific licensing requirements for lending and microfinance services via digital channels, including mobile applications. The proposed rules also include new provisions for identifying major shareholders and funding sources, along with an undertaking on fund sources.

Another significant change is that NBFCs will now be required to maintain membership in relevant microfinance associations. Furthermore, to create a more conducive business environment, the amendments allow existing companies the opportunity to convert into an NBFC.

The SECP believes these amendments are crucial for the long-term sustainability of Pakistan’s NBFC sector. The notification of these proposed changes is available on the SECP’s website, and stakeholders are encouraged to submit their feedback and comments via email to amjad.iqbal@secp.gov.pk.