Leasing Companies

Certificates of Investments/Deposits

Non-banking Financial Company (NBFCs) with license to undertake leasing services are permitted to raise deposits in form of “Certificate of Deposits”. However, they are not allowed to open checking deposit accounts and issue cheque books.

In order to be eligible to raise deposits, a leasing company must be compliant with the following main conditions:

  1. The NBFC is listed on a stock exchange.
  2. The NBFC has been, as per the audited accounts, making profits for a period of at least two years.
  3. the operations of the NBFC and the conduct of its directors with respect to the NBFC has been in accordance with law.
  4. The NBFC has been assigned a credit rating of minimum investment grade i.e. BBB- from a credit rating agency.

A NBFC compliant with the above conditions may submit an application to SECP for seeking permission to raise deposits. A NBFC after obtaining permission may raise deposits. A NBFC can only raise deposits from individuals up to three times of its equity.

While making a deposit with a NBFC, the general public should at the minimum ensure that;

  1. The NBFC has a valid license from SECP to do business in Pakistan.
  2. The NBFC has valid permission from SECP to raise deposits.
  3. The NBFC has minimum investment grade rating from any of the following two rating agencies:
    • Pakistan Credit Rating Agency Limited (PACRA)
    • JCR-VIS Credit Rating Company Limited (JCR-VIS)

The credit rating shall be updated at least once every year.

  1. The past track record of the NBFC regarding repayment to depositors.
  2. The profitability/dividend distribution history of the NBFC, which can be assessed through financial statements.
  3. The repute of the NBFC in the industry, the key management personnel of the NBFC and their general repute in the industry.

A person investing in the deposit schemes shall note that the deposits raised by an NBFC are subjected to various risks especially credit risk. The deposits of an NBFC are unsecured and are lower in rank to secured creditors of the NBFC. As per law, no preferential treatment is available to depositors of a NBFC in case of its liquidation.