Tata Sons, the principal investment holding company of the Tata Group, exceeds the threshold and falls within the RBI’s most stringent supervisory framework.
| Photo Credit:
ANUSHREE FADNAVIS
The Reserve Bank of India’s (RBI) updated regulatory framework for non-banking financial companies (NBFCs) does not materially alter the position of Tata Sons, which may still be required to list unless it undertakes a significant strategic restructuring.
The updated Reserve Bank of India (Non-Banking Financial Companies-Registration, Exemptions and Framework for Scale-Based Regulation) Directions 2025 define ‘public funds’ as funds raised either directly or indirectly. However, the definition excludes funds raised through instruments that are compulsorily convertible into equity shares within five years from the date of issue.
According to Nazneen Ichhaporia, Partner at ANB Legal, the provision relating to ‘public funds’ is largely clarificatory and does not introduce any new implications beyond what was already contemplated under the earlier framework.
‘The original definition already covered funds raised both directly and indirectly through associates or group entities, which is how the term would typically be interpreted in legal parlance. For the Tata Group, nothing changes. Under the new guidelines, Tata Sons would continue to be classified in the Upper Layer. Any relief from the listing requirement would depend on the RBI granting an exemption, which appears unlikely,” she said.
As things stand, Tata Sons’ classification as an Upper-Layer NBFC (NBFC-UL) could eventually require it to pursue a public listing unless it undertakes a significant strategic restructuring.
The updated Directions stipulate that NBFCs with an asset size of ₹1 lakh crore or more will be categorised as Upper Layer entities and subjected to enhanced regulatory oversight. By this metric, Tata Sons, the principal investment holding company of the Tata Group, exceeds the threshold and falls within the RBI’s most stringent supervisory framework.
A key feature of the revised framework is the mandatory five-year period during which an NBFC classified as Upper Layer must continue to comply with enhanced regulations. Even if the company’s asset size falls below the threshold in subsequent years, it will remain in the Upper Layer for at least five years. Under the normal route, an NBFC can exit the category only if it does not meet the classification criteria for five consecutive years.
This provision effectively prevents companies from temporarily shrinking their balance sheets to avoid stricter regulations, including listing-related requirements applicable to certain Upper-Layer NBFCs.
However, the RBI has provided a limited avenue for an earlier exit. The Directions state that an NBFC-UL may move out of the enhanced regulatory framework before completing the five-year period if the change results from a voluntary strategic restructuring undertaken under a board-approved policy. Such restructuring could involve a fundamental realignment of business operations or the corporate structure.
The central bank has clarified that this relaxation will not be available where the reduction in operations stems from financial stress, deteriorating asset quality or other adverse business conditions. In such cases, the company will continue to remain under enhanced regulatory supervision.
The revised Directions also clarify exemptions available to Core Investment Companies (CICs). Certain unregistered CICs, as well as those meeting specified capital and leverage requirements, may be exempt from registration under Section 45-IA of the RBI Act.
In addition, NBFCs that do not accept public deposits will continue to enjoy exemptions from select provisions of the Act, including Sections 45-IA, 45-IB and 45-IC, subject to prescribed conditions.
Published on July 2, 2026
