ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has revised regulations for the Non-Banking Finance Companies (NBFCs) regarding limit on aggregate liabilities of the NBFCs.
In this connection, the SECP has proposed amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008 through issuance of an SRO435(I)/2021.
The SECP has directed the NBFCs that the contingent liabilities shall not exceed 10 times of the equity for the NBFCs exclusively engaged in the business of issuance of guarantees against financing to the SMEs.
According to the amended regulations, for an NBFC that is exclusively engaged in the business of issuance of guarantees against financing to the SMEs and debt instruments issued for financing SMEs, the contingent liabilities shall not exceed 10 times of the equity.
Under the regulations, the aggregate liabilities, excluding contingent liabilities and security deposits, of a non-deposit taking the NBFC shall not exceed 10 times of its equity.
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Moreover, for an NBFC engaged exclusively in the business of issuance of guarantees to enhance the quality of debt instruments issued to finance infrastructure projects in Pakistan, the aggregate liabilities, excluding contingent liabilities and security deposits shall not exceed 10 times of its equity and qualified capital and for this purpose the Commission may specify, through circular, qualified capital and its terms and conditions.
The following shall not constitute contingent liabilities: (I) non-fund based finance to the extent covered by liquid assets; (II) non-fund based finance where the payment is guaranteed by the federal government, provincial government, financial institution rated AA by a credit rating agency registered with the Commission and (III) claims other than those related to provision of Finance (fund based or non-fund based) to the NBFCs’ constituents, where the probability of conversion of these claims into liabilities is remote in the view of the auditor, the SECP added.
Copyright Business Recorder, 2022