Islamabad: SME Leasing Limited is currently under formal regulatory review by the Securities and Exchange Commission of Pakistan (SECP), following a series of compliance failures in maintaining the required Minimum Equity Requirement (MER). The company, a subsidiary of the financially troubled SME Bank Limited, is grappling with a significant equity deficit amounting to Rs. 33 million, substantially below the required Rs. 50 million.

According to information available from the Pakistan Stock Exchange (PSX), the SECP issued a show-cause notice to SME Leasing Limited on January 12, 2024, highlighting the company's non-compliance with Regulation 4 of the Non-Banking Finance Companies and Notified Entities Regulations, 2008. This regulation mandates a minimum equity threshold which the company has consistently failed to meet, prompting the SECP to put the company's license renewal on hold since April 29, 2022.

The financial struggles of SME Leasing Limited are compounded by its parent company's dire status, SME Bank Limited, which the government began to wind down following a notification on March 18, 2023. This decision was taken after the State Bank of Pakistan designated SME Bank as a failed institution, prohibiting it from accepting new deposits or conducting further business.

During a series of hearings, the most recent being on September 16, 2024, SME Leasing Limited's management has been exploring various strategies to address the capital shortfall and ensure regulatory compliance. Despite these efforts, significant challenges remain, as major shareholders, including the Government of Pakistan, have shown limited interest in recapitalizing the leasing firm or continuing its operations independently of the bank.

The company's current operational metrics are grim, with a total active portfolio of Rs. 263 million and a substantial portion tied up in non-performing leases or litigation cases. The management has made it clear that without an equity injection, which they argue is beyond their control and lies with the finance division of the Federal Government, their ability to fully rectify the situation remains limited.

As the regulatory proceedings continue, the future of SME Leasing Limited hangs in the balance, with potential significant implications for its employees, creditors, and the broader financial market in Pakistan.