Simplifying enrolment of NBFCs: SECP introduces Self-Assessment Declaration Form

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) Thursday introduced a Self-Assessment Declaration Form to expedite and simplify the enrolment of Non-Banking Finance Companies (NBFCs) digital lending apps on its approved list.

The self-assessment declaration issued through Circular 14 of 2024 enlists all relevant information that the digital lending NBFCs are required to provide, along with the application for listing their app on SECP’s Whitelist. Furthermore, it enables a more efficient and cost-effective entry process, which encourages innovation and growth in the digital lending sector.

The regulatory framework requires all licensed NBFCs to set up adequate cybersecurity measures and controls in order to maintain confidentiality, integrity and to prevent unauthorized access to borrowers’ phone books or photo galleries, among other things. Apps that satisfy the required cyber security criteria are approved by SECP and added to its Whitelist of lending apps.

SECP amends NBFC regulations to adapt to new technologies

The SECP has also enabled digital lenders to introduce new product verticals, such as embedded lending through APIs, Buy Now Pay Later (BNPL) services, and Employer Integrated Earned Wage Access. SECP’s innovative digital lending ecosystem focuses on consumer-centric solutions thereby ensuring transparency, data protection and empowerment of businesses and consumers.

All transactions including disbursement and recovery shall be carried out only through the bank accounts/branchless banking accounts of the digital lender and disbursement shall be ensured to be made in the bank account/branchless banking account of the borrower (IBAN/E-Wallet Mobile Account Number after title verification through 1-link title fetch service or IBAN/E-Wallet mobile account number and CNIC Pairing).

The SECP has directed all digital lenders engaged in digital nano lending to ensure that the compounding of markup shall not be allowed (no markup shall accrue either on original markup or on late payment charges). The aggregate amount of nano-lending extended to a borrower by all NBFCs shall not exceed Rs 100,000 at any point in time.

A Digital Lender shall also provide comprehensive disclosures to the borrowers on collection of data, its safe storage, sharing and usage and in this regard shall also obtain explicit consent of the borrower. Furthermore, a digital lender shall not acquire any information that is personal in nature and is not directly related to the credit score calculations.

The SECP has also directed the digital Lenders shall ensure that the access to personal data is protected by strong customer authentication mechanism.

Copyright Business Recorder, 2024