ISLAMABAD, Jan 28: The Securities and Exchange Commission of Pakistan here on Wednesday unveiled revised prudential regulations for modarabas which will come into effect immediately.

Issued in exercise of powers conferred on the Commission by the Modaraba Ordinance 1980, these regulations are aimed at providing a level-playing field to all participants of the non-bank financial sector including the modarabas, the SECP spokesman said.

These regulations has been finalized after consultation with the Modaraba Association of Pakistan (MAP), he said. It was expected that these would contribute towards improving the risk management capabilities and promoting corporate governance in the modaraba sector.

The revised regulations have been divided into four segments: Part-I contains a comprehensive set of definitions covering all their activities/functions; Part-II lays down guidelines for risk management in respect of corporate borrowers and individual borrowers; Part-III covers the regulations pertaining to the operation of modarabas; and Part-IV encompasses the 'Know Your Customer' (KYC) and anti-money laundering issues. Salient features of the regulations are as follows:

* A complete set of definitions has been introduced keeping in view the definitions provided in the prudential regulations for NBFCs (non-banking finance companies).

* Margin requirements against the facility to be granted by the modarabas have been reviewed and the same have been reduced.

* A separate set of regulations for housing finance facilities to individuals have been incorporated in order to promote the housing finance sector.

* Criteria for provisions for non-performing assets of modarabas have been reviewed and conditions for reversal of provisions have been included.

* In order to prevent the criminal use of modaraba for the purpose of money laundering and other unlawful activities, a separate sector has also been introduced. Besides, a fit and proper test for appointment of directors and chief executive of modaraba companies along with requisite information has also been incorporated.

The new set of prudential regulations is being circulated to all the quarters concerned and has also been placed on the SECP website - www.secp.gov.pk - for the information of general public.