NBFC Formation and Licensing

NBFC formation and licensing: two separate approvals

Under the NBFC (Establishment and Regulation) Rules, 2003, consolidated through September 2023 ↗, a promoter normally obtains SECP permission to form an NBFC under rule 4, incorporates within that permission period, and applies separately for the activity-specific licence under rule 5. The NBFC and Notified Entities Regulations, 2008, updated to 15 January 2026 ↗ govern minimum equity, fees, prudential and business conduct requirements. A certificate of incorporation is not permission to provide regulated finance.

Distinguish lending NBFCs (investment finance, leasing, housing finance and discounting), fund-management NBFCs (asset management, investment advisory and specified fund-management activities), and the separate conditions for non-bank microfinance, digital lending, deposit-taking, REIT and private funds. Rule 5(2) prevents a lending NBFC from taking a fund-management licence and vice versa. The legal classification affects ownership, minimum equity, governance and the required permissions.

The ordinary sequence is classify the business → fit-and-proper screening → Form I formation permission → incorporation → Form II operating licence → satisfaction of licence conditions → commencement. An existing company may qualify through a different route under Schedule I. An NBFC licensed for investment finance may, under the amended rule and regulation, also carry out leasing, housing finance and discounting without separate licences for those specified activities, subject to the applicable conditions; that does not authorise unrelated services.

Eligibility, sponsors, board and minimum equity

Fit-and-proper and group restrictions. Rule 3 applies SECP fit-and-proper criteria to promoters, directors, CEO and chairman. Rule 5(6) requires an eligible corporate form and governance, no prohibited group overlap for the same activity, adequate equity and compliance with Schedule I. Promoters ordinarily receive at least 25% of paid-up capital. Relevant promoter/majority-shareholder and director shares are subject to CDC blocking and transfer controls, with specific qualifying-share exceptions. Beneficial ownership, group links, source of funds and directors' outside appointments require individual scrutiny.

Business categories must remain distinct. Fund-management NBFCs and lending NBFCs are separately classified by rule 5(2). Asset management or investment advisory does not automatically authorise public lending or deposit-taking. The November 2025 amendment incorporated into regulation 4 permits an investment-finance licence holder to undertake leasing, housing finance and discounting without separate licences for those specified activities. An applicant proposing a hybrid business must test whether the activities are legally compatible before incorporating.

Minimum equity. Schedule I of the January 2026 Regulations lists PKR 100 million for ordinary non-deposit investment finance, PKR 50 million for non-deposit leasing, housing finance or discounting, PKR 200 million for asset management, and PKR 30 million for investment advisory. A new deposit-taking lending NBFC is listed at PKR 1 billion. Non-bank microfinance, digital lending and digital asset-management have separate conditional amounts. These are continuing regulatory equity tests, not merely nominal authorised share capital.

Special applicants. Section 42 companies holding investment-finance licences restricted to microfinance may benefit from the defined exemptions in S.R.O. 1416(I)/2025; those exemptions do not apply generally to all NBFCs. Foreign sponsors must satisfy applicable identification, ownership, fitness and exchange-control rules. Deposit-taking needs separate SECP permission and additional prudential, history and rating requirements; the base NBFC licence alone does not permit accepting deposits.

Prescribed forms and supporting evidence

Formation stage: Form I and annexure. Prepare promoters' identities and financial standing, proposed directors and CEO, shareholding and group structure, fit-and-proper declarations, proposed constitutional objects, business model, feasibility study, source-of-funds evidence, initial capital plan and receipt for the prescribed fee. The 2023 amendments removed redundant requirements and replaced certain affidavits with declarations. Do not reintroduce superseded certified-copy or affidavit requirements solely because an older SECP checklist lists them.

Incorporation stage. After permission, incorporate under the Companies Act, 2017 and Companies Regulations, 2024 in the authorised form. Preserve the permission letter, constitutional documents, certificate, board resolutions, statutory returns, beneficial ownership record and evidence that the actual sponsor pattern and capital match the approved plan. A corporate filing is not the same as the later NBFC licence.

Operating stage: Form II. Prepare the intended activity's licence application, company and sponsor records, fit-and-proper dossiers, financial statements or opening balance sheet as applicable, auditor-supported equity proof, bank records, share-blocking evidence where required, staff and governance arrangements, risk-management and internal-audit policies, compliance structure, business-continuity and IT controls, and fee evidence. SECP may request additional particulars; each observation should be answered with traceable supporting records.

Activity-specific additions. Lending requires underwriting, borrower assessment, security, collections, exposure and complaint policies. Fund management requires mandates or proposed schemes, custody/trustee and valuation arrangements, investor disclosures and conflict controls. Digital applicants must establish eligibility for the relevant technology and consumer-protection framework. Deposit-taking requires a separate permission case. Where an annexure says information is required “where applicable”, explain the reason for non-applicability rather than inventing historic financial statements.

How to obtain an NBFC licence in Pakistan

1. 01
   Classify the exact regulated activity

   Define the proposed product, customers and revenue. Identify lending, fund management, non-bank microfinance, digital or deposit-taking status and any separate scheme or fund registration. Match the proposed class against rule 5, Schedule I and the January 2026 regulations.

2. 02
   Screen promoters, directors and equity

   Review fit-and-proper history, ownership, group conflicts, board independence, source of capital, promoter shareholding, CDC blocking requirements and the applicable minimum equity. Resolve foreign-investment or funding issues before Form I.

3. 03
   Obtain prior SECP permission in Form I

   Submit the prescribed annexure and non-refundable fee under rule 4. SECP may request further material. Permission is valid for six months, extendable by a maximum three months in special circumstances on an application made before expiry. This is not a regulator processing-time promise.

4. 04
   Incorporate and prepare the operating application

   Within the permission period, incorporate in the authorised form and submit the licence application. Align the actual sponsors, directors, constitutional objects and capital with the permission and intended financial activity. Record all changes requiring SECP attention.

5. 05
   Submit Form II for the operating licence

   Under rule 5, provide the non-refundable processing fee and the category-specific evidence. SECP may request clarification or impose conditions. On satisfaction of the statutory tests it grants the licence in Form III. An ordinary incorporation certificate cannot substitute for Form III.

6. 06
   Fulfil conditions and commence lawfully

   Rule 5(6) covers sponsor shares, qualified personnel, management and regulatory undertakings. A new company may have up to 90 days from grant to furnish evidence of qualified personnel. Commence within the period stated in the licence, or obtain an extension where lawfully available; no universal commencement deadline should be assumed.

7. 07
   Renew and maintain compliance

   Rule 5(8) provides a three-year licence and requires a Form IV renewal application at least one month before expiry. Rule 5(9) addresses a properly filed renewal awaiting SECP decision. Continue financial, governance, prudential, AML/CFT/CPF and reporting obligations.

Official filing texts: Rules 3–5, Forms I–IV and Schedule I ↗ · NBFC Regulations, Schedules I–II ↗.

After approval: governance, reporting and prudential controls

Maintain the applicable minimum equity and any licence-specific prudential ratios. The 2026 Regulations require regulatory information and impose business-specific restrictions on exposures, lending, asset management, investment advice, deposits and consumer protection. A lending NBFC should not assume fund-management requirements replace its own credit-risk and borrower-protection duties.

Rule 7 requires accurate accounts, records of board and committee decisions and relevant financial records retained for at least ten years. It also addresses approved statutory auditors, qualified finance officers, independent internal audit and compliance functions, with particular concessions for non-deposit-taking unlisted lending NBFCs. Apply the actual Schedule I governance and reporting requirements to the entity.

Provide quarterly and annual financial information as prescribed for the licence category; maintain rating and industry association obligations where applicable. Monitor fit-and-proper status, changes to sponsor shares, management, activities and internal controls. Implement AML/CFT/CPF, customer due diligence, complaints and data controls, particularly for digital lending. A collective investment scheme or notified entity may require separate registration, custody, trustee and investor reporting.

Do not commence unlicensed activities or accept deposits merely because an NBFC licence exists. If operations cease, follow the regulated licence surrender or cancellation route and address outstanding customers and liabilities before considering ordinary company closure.

Regulatory fees, equity and time periods

Schedule II(A) of the January 2026 consolidated NBFC Regulations lists PKR 250,000 for Form I formation permission and PKR 500,000 for Form II operating-licence application. The corresponding non-bank microfinance amounts are PKR 125,000 and PKR 250,000. The schedule lists nil for Form IV renewal. These are SECP application fees, not incorporation costs, paid-up capital, stamp duties, taxes or professional charges. Check later fee notifications and current payment instructions before remittance.

Regulation 4 and Schedule I prescribe ongoing equity requirements according to activity: PKR 100 million for ordinary non-deposit investment finance; PKR 50 million for non-deposit leasing, housing finance or discounting; PKR 200 million for asset management; PKR 30 million for investment advisory; and PKR 1 billion for a new deposit-taking lending NBFC. Special digital and microfinance thresholds are conditional, not generally available. Rule 4 permission is valid six months, with a possible three-month extension; a licence ordinarily lasts three years and renewal is due at least one month before expiry. None is a promised approval turnaround time.

Governing law and official references

The NBFC (Establishment and Regulation) Rules, 2003, NBFC and Notified Entities Regulations, 2008, Companies Act, 2017 and Companies Regulations, 2024 form the principal framework. The actual activity may additionally engage the Private Funds Regulations, REIT Regulations, Voluntary Pension System Rules, SECP AML/CFT/CPF Regulations and digital lending directions. Company incorporation, fund registration, deposit-taking permission and operating licences are legally distinct.

How Chambers can assist

Chambers can review the legal route, identify regulatory constraints, prepare or review the supporting corporate and legal documents, manage the prescribed submission and correspond with the competent authority where instructed. The scope of the engagement will be determined by the applicant’s particular circumstances.

For an initial enquiry, identify the proposed activity, applicant entity and current stage, and provide the available documents indicated above. Please avoid sending confidential or identity-sensitive records through an unencrypted first contact.