Applicable investment limits: Newly-licenced lending NBFCs must ensure compliance in a year: SECP

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has directed the newly-licensed lending Non-Banking Finance Companies (NBFCs) to ensure compliance with applicable investment limits within one year from the date of the grant of license.

The SECP has issued S.R.O. 423(I)/2023 to propose amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008.

Through the revised regulations, the SECP has specified a time period of one year for the newly-licensed lending NBFCs to ensure compliance with applicable investment limits.

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According to the SECP, the lending NBFC shall primarily invest in its licensed form of business. Leasing Company, Housing Finance Company and Discount House shall primarily invest at least 70 per cent of their total assets in leasing, housing finance and discounting services respectively on quarterly average basis.

Provided that cash, deposits with financial institutions, and investment in government securities shall be excluded to calculate the said limit, the regulations said.

The regulations stated that a Leasing Company, while calculating its investment in leasing, may include vehicle financing as part of leasing.

An Investment Finance Company shall invest at least seventy per cent of its assets in Finance on quarterly average basis: Provided that cash, deposits with financial institutions, and investment in government securities shall be excluded to calculate the above limit.

Under the regulations, a Non-Bank Micro Finance Company shall invest at least fifty per cent of its assets in micro financing or such other limit as may be specified by the Commission through notification in the official Gazette from time to time. The cash, deposits with financial institutions, and investment in government securities shall be excluded to calculate the above limit.

“Notwithstanding anything contained in specified clauses, a newly-licensed lending NBFC shall ensure compliance with above applicable investment limits within one year from the date of grant of license or within such extended time as may be allowed by Commission at the time of grant of license,” revised regulations added.

Copyright Business Recorder, 2023