The Reserve Bank of India (RBI) confirmed on January 16 that Tata Sons’ appeal for exemption from mandatory stock listing is under review. As per current regulations, non-banking financial companies classified as upper-layer entities (NBFC-UL) are required to be publicly listed within three years of their classification. Tata Sons, the holding company overseeing businesses in steel, technology, and automobiles, was designated as an NBFC-UL in 2022 under RBI’s scale-based regulatory framework.
Despite its classification as a core investment company (CIC) that primarily holds and manages operational businesses rather than engaging in direct operations, Tata Sons fell under the upper-layer designation due to its earlier debt profile. In response, the conglomerate submitted an application seeking regulatory relief to avoid listing on stock exchanges, arguing its case for de-registration as an NBFC-UL.
Background of Tata Sons’ Classification
The RBI’s classification of Tata Sons as an NBFC-UL stemmed from its significant outstanding loans, which amounted to over ₹30,000 crore around four years ago. Although CICs are typically exempt from extensive financial regulations, the holding company was brought under stricter oversight due to its financial liabilities at the time. However, Tata Sons has since eliminated all its outstanding borrowings and provided the Reserve Bank of India with a formal commitment not to undertake future borrowing activities, either directly or indirectly, to support its subsidiaries.
In June 2023, the company submitted this undertaking to bolster its case for exemption from the mandatory listing requirement. Additionally, a Right to Information (RTI) response dated October 2024 disclosed that Tata Sons had also applied for the cancellation of its CIC registration. This move, if approved by the RBI, could provide further grounds for exemption from regulatory obligations tied to its NBFC-UL classification.
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Regulatory Implications and Pending Decision
If the Reserve Bank of India grants Tata Sons’ request for de-registration and cancels its CIC license, the company may no longer be bound by the requirement to list on stock exchanges. However, regulatory protocols dictate that any entity classified as an NBFC-UL remains subject to heightened oversight for at least five years, even if it no longer meets the criteria in subsequent evaluations.
This decision could have significant implications for Tata Sons and other conglomerates navigating the regulatory framework. The outcome will determine whether the RBI considers Tata Sons’ debt clearance and operational model sufficient grounds for exemption. As of now, the regulator’s decision remains pending, keeping industry stakeholders closely watching the developments.
