Tata Sons may have to list as upper-layer NBFC; RBI Governor Sanjay Malhotra signals

Tata Sons may have to list on the stock exchanges if it remains classified as an upper-layer non-banking financial company (NBFC), Reserve Bank of India (RBI) Governor Sanjay Malhotra indicated on Friday, as reported by The Indian Express.

Speaking at the NDTV World Summit in New Delhi, Malhotra said NBFCs and core investment companies (CICs), including entities such as Tata Sons, must register with the RBI because of the risks associated with their operations, including systemic risks.

“And if it is in the upper layer (of the NBFC category), then it is required to list,” he said.

The RBI recently classified Tata Sons as a CIC under its NBFC-Upper Layer framework. Entities falling within the central bank’s definition of an NBFC or CIC must register if they have direct or indirect access to public funds.

Explaining the rationale behind the regulatory framework, Malhotra said, “They sit on top of group companies where they leverage funds… they can leverage funds, they do leverage funds, and they use the balance sheets of the group companies to return those funds.”

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“So, the funds of the public, whether through banks, corporate bonds or other means, are at risk when these CICs engage in this kind of activity. It is for these reasons that CICs, which are a type of NBFCs, are required to be registered,” he said.

“Only in cases where a CIC does not have access, directly or indirectly, to public funds do we allow them not to register,” Malhotra said.

The RBI recently rejected Tata Sons’ application for deregistration as a CIC and directed the company to comply with the applicable guidelines.

At its September 17 board meeting, Tata Sons directors decided to proceed with the listing as directed by the RBI, despite opposition from Tata Trusts chairman Noel Tata. Tata Trusts has maintained that the holding company should remain unlisted.

The dispute intensified after Tata Trusts submitted a proposal on September 28 to merge Tata Electronics Systems Solutions Pvt Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons Pvt Ltd. If implemented, the proposal could alter Tata Sons’ structure and potentially affect its regulatory classification.

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Meanwhile, Tata Sons could not hold its annual general meeting because of a lack of quorum after the Charity Commissioner imposed a restraining order on Sir Ratan Tata Trust, preventing it from recommending a joint representative. Trustees Venu Srinivasan and Vijay Singh have also filed complaints with the Charity Commissioner, further escalating tensions over the listing issue.

Separately, Malhotra said India’s economic growth remained broad-based, supported by resilient high-frequency indicators. He reiterated that price stability was a key priority, alongside sustaining economic growth, and highlighted food and fuel prices as important drivers of inflation.

On the rupee, the RBI Governor clarified that the central bank did not target a specific exchange-rate level. Instead, its objective was to prevent disruption and ensure orderly functioning of the foreign exchange market.

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