RBI says Tata Sons appeal to avoid listing under consideration

tata sons

Formally acknowledging the request from Tata Sons seeking an exemption from listing in the bourses, the Reserve Bank of India on January 16 said the application from Tata Sons for de-registration is under examination. This implies that Tata Sons has sought for regulatory dispensation from the need to list the entity within three years from being classified as NBFC-UL or non-banking financial companies in the upper layer.

The mega holding company of steel to technology to automobiles business was classified as NBFC-UL in 2022 when the Reserve Bank of India transitioned to scale based regulations to oversee non-banks. This is despite Tata Sons being classified as core investment company (CIC) or a non-bank, which does not engage in any business operations and exists only to own and hold operational businesses, including lending companies. With a loan outstanding of over Rs 30,000 crore about four years ago, RBI decided to classify Tata Sons as an upper layer NBFC.

However, subsequently, the holding company has squared off all its outstanding loans and has extended an undertaking to the regulator that henceforth it shall not have any borrowings in its balance sheet whether directly or indirectly to support group entities. According to sources, this undertaking was provided to the RBI last year, around June, in order to seek an exemption from listing. Further, a response by the RBI to a query dated October 2024 under the Right to Information Act reveals that Tata Sons has submitted an application for surrendering its certificate of registration as a core investment company and the same is under examination.

Once RBI cancels its CIC license, Tata Sons may be exempt from the listing requirements. However, it is pertinent to note that, once an NBFC is classified as NBFC-UL, it shall be subject to enhanced regulatory requirement, at least for a period of five years from its classification in the layer, even in case it does not meet the parametric criteria in the subsequent periods.