Introduction
Non-Banking Financial Companies (NBFCs) play a crucial role in Pakistan’s financial ecosystem by offering specialized services such as leasing, investment advisory, asset management, microfinance, and housing finance—outside the realm of traditional banking. However, NBFCs are subject to strict regulatory compliance requirements enforced by the Securities and Exchange Commission of Pakistan (SECP) under the NBFC Regulatory Framework.
This guide outlines the key compliance obligations for NBFCs in Pakistan, including licensing, operational, reporting, and corporate governance requirements.
What Is an NBFC?
As per the NBFC Rules, 2003, and NBFC Regulations, 2008, an NBFC is any company engaged in the business of:
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Investment finance
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Leasing
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Housing finance
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Discounting of bills
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Venture capital and private equity
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Microfinance
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REITs (Real Estate Investment Trusts)
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Modarabas (Islamic NBFCs)
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Asset management and mutual funds
NBFCs do not accept demand deposits like banks but operate under SECP’s regulatory oversight, not the State Bank of Pakistan (SBP).
1. Licensing Requirements
Regulatory Authority: SECP – Specialized Companies Division
Pre-Licensing Steps:
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Company incorporation with a clear principal line of business (via SECP)
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Meet minimum capital requirements as per sector (e.g., PKR 200 million for leasing, PKR 300 million for housing finance)
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Submit a fit and proper profile for directors and key officers
License Application Includes:
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Business plan
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Financial projections
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KYC/AML framework
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Risk management policy
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Organizational chart and compliance plan
Post-approval: License is granted under Section 282C of the Companies Ordinance, 1984 (now repealed and replaced by the Companies Act, 2017)
2. Corporate Governance & Board Composition
NBFCs must comply with:
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NBFC Corporate Governance Regulations, 2023
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Board of Directors with a mix of executive, non-executive, and independent directors
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Appointment of CEO, CFO, and Company Secretary with SECP approval
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Adoption of internal codes for:
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Conflict of interest
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Related party transactions
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Risk oversight
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NBFCs are also required to constitute an Audit Committee and Risk Committee.
3. Financial and Regulatory Reporting
| Report Type | Frequency | Submission To |
|---|---|---|
| Audited Financial Statements | Annually | SECP & FBR |
| Quarterly Financial Statements | Quarterly | SECP |
| Compliance Certificate (Form 17) | Annually | SECP |
| AML/CFT Reporting (STRs, CTRs) | As needed | FMU & SECP |
| Corporate Governance Compliance | Annually | SECP |
NBFCs must appoint an external auditor approved by SECP and ensure the audit partner rotation every five years.
4. Anti-Money Laundering (AML) & Know Your Customer (KYC)
NBFCs are classified as Reporting Entities under the Anti-Money Laundering Act, 2010.
Compliance requirements include:
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KYC/CDD policy for onboarding clients
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Transaction monitoring system
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Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs) to Financial Monitoring Unit (FMU)
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AML/CFT officer designation
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Staff training and screening
Non-compliance may lead to penalties, license suspension, or criminal liability.
5. Capital Adequacy & Prudential Regulations
NBFCs are subject to:
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Minimum Equity Requirements (varies by business type)
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Capital Adequacy Ratios for risk management
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Limits on exposure to single clients, sectors, and related parties
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Liquidity management policies for cash flow sufficiency
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Maintenance of statutory reserves and provisioning requirements
6. Other Mandatory Compliance Areas
| Area | Requirement |
|---|---|
| Customer Grievance Handling | Establish complaint management and dispute resolution mechanisms |
| SECP Inspections | Cooperate with off-site and on-site regulatory reviews |
| Investor Education | Provide client disclosures, marketing compliance, and transparent reporting |
| SECP eServices Filing | File Forms A, B, 29, and 28 for company changes and officer updates |
7. Penalties for Non-Compliance
Failure to meet NBFC compliance requirements can result in:
| Violation Type | Penalty |
|---|---|
| Late filing of financial statements | Fines up to Rs. 100,000 per instance |
| Unfit management or board structure | Revocation or suspension of license |
| Breach of prudential limits | Monetary fines, audit mandates, or enforcement action |
| AML/KYC violations | Regulatory reporting to FMU + criminal proceedings |
8. Renewal and Ongoing Review
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NBFC licenses must be renewed annually
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SECP may require:
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Updated risk reports
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Compliance audits
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CEO/CFO reappointments under fit and proper criteria
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Conclusion
Non-Banking Financial Companies (NBFCs) in Pakistan operate under a comprehensive compliance framework established by the SECP to ensure financial stability, investor protection, and market integrity. Whether you are a leasing company, asset manager, microfinance provider, or housing financier, timely and accurate compliance is essential to retain licensing, avoid penalties, and build market credibility.
Need Help Managing Your NBFC Compliance?
At Sterling Consultancy, we offer full-spectrum services for:
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SECP licensing and regulatory filings
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Corporate governance setup and reporting
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AML/KYC program implementation
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Financial and tax audit coordination
