Tata Sons working on restructuring plans to comply with RBI rules: Report

The 'upper layer' status can have implications for the company's borrowing costs, among other things.

Tata Sons, the holding company of the Tata Group, is reportedly working on a restructuring exercise to comply with the regulations laid out by the Reserve Bank of India (RBI).

The RBI has declined to grant any concessions after an informal request to exempt the mandated listing of non-banking finance companies (NBFCs) in the 'upper layer', The Economic Times reported on February 8. The 'upper layer' refers to NBFCs that are considered systemically important and have significant interconnectedness with the financial system.

Multiple options are being evaluated by Tata Sons to comply with the regulations, an official familiar with the matter told ET.

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One option being considered by Tata Sons to comply with the regulations is transferring its stake in financial services venture Tata Capital to another entity, the report added. This is believed to be a significant reason for Tata Sons being in the 'upper layer'. The 'upper layer' status can have implications for the company's borrowing costs, among other things.

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The company's restructuring plan is aimed at becoming compliant with the RBI regulations while minimising any negative impact on its operations.

According to the RBI rules, if a 'core investment company' has assets worth less than Rs 100 crore and does not raise public funds, it can avoid being classified as a CIC or an 'upper layer' NBFC and is not required to go for a public listing. This exemption allows such companies to neatly sidestep the regulations.

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Tata Sons, on the other hand, is registered as a CIC with the RBI and has been classified as an 'upper layer' NBFC, which mandates the company to follow a strict regulatory structure and requires it to list on the public market within three years of being notified. The RBI issued a notification to this effect for Tata Sons in September 2020.