Presentation (16)-2.pptx of merchantile law

Presentation

1. MERCANTILE LAW

2. Group members names Usama Ahmad 1039 Fatima Latif Khan 1005 Iqra Mukhtar 1052 Ali Raza 1019 Mehwish Nazir 1048

3. Objectives discussed in this presentation: Definition
introduction
Limitation
Obligation
Rights
Duties

4. NBFC Full Form : An NBFC is a Non-Banking Financial Company Defination: NBF Company are without banking license that provides financial services and products. General, these institutions cannot accept traditional demand deposits from the public, such as checks or savings accounts.
An NBFC is also called an NBFI, a non-banking financial institution.

5. Introduction A Non-Banking Financial Company (NBFC) is a financial institution that provides financial services and products, but does not hold a banking license. NBFCs are regulated by the Securities and Exchange Commission of Pakistan (SECP) and are subject to the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003. The definition of NBFC includes companies engaged in: - Investment activities
- Leasing
- Hire-purchase - Insurance
- Pension funds
- Discounting of instruments
- Investment advisory services

6. The key characteristics of NBFCs are: They do not accept deposits from the public
- They are not licensed to carry on banking business
- They are regulated by the SECP
- They provide financial services and products
- They are subject to prudential regulations and guidelines

7. Here are some examples of Non-Banking Financial Companies (NBFCs) in Pakistan:
1. Asset Management Companies_:
- HBL Asset Management Limited
- UBL Fund Managers Limited
2. _Pension Funds_:
- Employees’ Old-Age Benefits Institution (EOBI)
- Pakistan Pension Fund
3. _Insurance Companies_:
- State Life Insurance Corporation of Pakistan
- Jubilee Life Insurance Company Limited
4. _Microfinance Institutions_:
- Khushhali Bank Limited
There are many other NBFCs operating in Pakistan

8. Limitations Here are the limitations of Non-Banking Financial Companies (NBFCs): 1. No Deposit Takin g: NBFCs cannot accept deposits from the public like banks do.
2. Limited Funding: NBFCs have limited access to funds, which restricts their ability to lend or invest. 3. Regulatory Restrictions : NBFCs are regulated by the Securities and Exchange Commission of Pakistan (SECP), which imposes rules and guidelines on their operations.

9. Risk Management: NBFCs must manage their risks carefully, as they are not protected by deposit insurance like banks.
5. Limited Products : NBFCs can only offer specific financial products and services, unlike banks which offer a wide range of services. 6.Capital Requirements: NBFCs must maintain a minimum capital adequacy ratio to ensure financial stability.
7. Licensing and Registration: NBFCs need to obtain a license and register with the SECP before starting operations.
8. Reporting Requirements: NBFCs must submit regular reports to the SECP, which can be time-consuming and costly. These limitations help ensure that NBFCs operate safely and soundly, while also protecting the interests of their customers and the financial system as a whole.

10. Here are the pros and cons of Non-Banking Financial Companies (NBFCs): Pros : - Direct contact with clients, eliminating intermediaries : NBFCs cut out the intermediary—the role banks often play—to let clients deal with them directly, lowering costs, fees, and rates, in a process called disintermediation.
- High yields for investors: NBFCs offer investment opportunities with potentially higher returns. - Liquidity for the financial system : Providing financing and credit is important to keep the money supply liquid and the economy working well.
- Less regulated than banks: NBFCs are subject to less stringent regulations than traditional banks, allowing them to operate more flexibly.

11. Cons: Non-transparent operations: NBFCs are not as transparent as traditional banks, which can make it difficult to assess their financial health and stability.
- Systemic risk to financial system, economy : NBFCs can pose a risk to the financial system and economy if they are not properly regulated and monitored, as seen in the 2008 financial crisis.

12. Obligations Non-Banking Financial Companies (NBFCs) have various obligations that they need to fulfill to operate effectively and ensure compliance with regulations. Some of the key obligations of NBFCs include: Registration and Regulation: NBFCs need to be registered with the regulatory authority in their respective country. They are required to comply with the regulations set by the regulatory body governing their operations.

13. Capital Adequacy : NBFCs must maintain a minimum level of capital adequacy to ensure financial stability and protect the interests of depositors and investors. Prudential Norms: NBFCs are required to follow prudential norms related to income recognition, asset classification, and provisioning to maintain the quality of their assets and financial health. Asset Liability Management: N BFCs need to effectively manage their assets and liabilities to maintain liquidity and ensure that they can meet their financial obligations as they fall due.

14. Risk Management: NBFCs must have robust risk management frameworks in place to identify, assess, and mitigate various risks such as credit risk, market risk, and operational risk. Compliance and Governance: NBFCs need to adhere to corporate governance standards and ensure compliance with all relevant laws and regulations. They must have proper internal controls and risk management systems in place.
By fulfilling these obligations, NBFCs can operate responsibly, maintain financial stability, and build trust with their stakeholders.

15. Rights In Pakistan, Non-Banking Financial Companies (NBFCs) have certain rights that help protect their interests and ensure fair treatment in the financial system. Some of the rights of NBFCs in Pakistan include: Right to Fair Regulation: NBFCs have the right to be regulated in a fair and transparent manner by the regulatory authorities. This includes clear guidelines and regulations that govern their operations.

16. Right to Conduct Financial Activities : NBFCs have the right to engage in a range of financial activities as permitted by the regulatory framework, such as lending, investment, asset management, etc. Right to Access Funding: NBFCs have the right to access funding from various sources, including banks, financial markets, and other institutions, to support their operations and growth. Right to Fair Competition: NBFCs have the right to compete fairly in the financial market with other institutions while adhering to regulatory requirements and ethical business practices.

17. Right to Customer Data Protection: NBFCs have the right to protect the confidentiality and privacy of customer data and information in accordance with data protection laws and regulations. Right to Legal Recourse : NBFCs have the right to seek legal recourse in case of disputes, violations of rights, or non-compliance by other parties, including customers, suppliers, or regulatory authorities.
By upholding these rights, NBFCs in Pakistan can operate with confidence, maintain integrity in their business practices, and contribute to the overall stability and growth of the financial sector.

18. Duties The duties of Non-Banking Financial Companies (NBFCs) include several key responsibilities that they must fulfill to operate effectively and in compliance with regulations. Some of the main duties of NBFCs are: Compliance with Regulatory Requirements: NBFCs must comply with the regulations set by the regulatory authority governing their operations. This includes obtaining the necessary licenses, adhering to capital adequacy requirements, and following prudential norms.

19. Risk Management: NBFCs have a duty to implement robust risk management practices to identify, assess, and mitigate various risks such as credit risk, market risk, and operational risk. This helps ensure the stability and sustainability of their operations. Customer Protection: NBFCs are responsible for protecting the interests of their customers by providing transparent and fair services, disclosing relevant information, and handling customer complaints and grievances effectively. Asset Liability Management: NBFCs have a duty to manage their assets and liabilities prudently to maintain liquidity, meet financial obligations, and safeguard the interests of depositors and investors.

20. Disclosure and Reporting: NBFCs must make timely and accurate disclosures to regulatory authorities and the public. They are also required to submit periodic reports on their financial performance, compliance with regulations, and other relevant information. Corporate Governance: NBFCs are expected to adhere to good corporate governance practices, including having proper internal controls, risk management systems, and transparent decision-making processes in place. By fulfilling these duties, NBFCs can operate responsibly, maintain the trust of stakeholders, and contribute to the stability and development of the financial system.

21. Conclusion In conclusion, Non-Banking Financial Companies (NBFCs) play a vital role in the financial system of Pakistan. By balancing their rights with their duties, NBFCs contribute to the economy by providing financial services, managing risks effectively, and upholding regulatory standards. It is essential for NBFCs to operate ethically, comply with regulations, and prioritize customer protection to ensure a stable and trustworthy financial environment for all stakeholders involved.