RBI Governor Sanjay Malhotra says large non-banking finance companies and core investment companies must remain regulated when they can expose public funds to risks across sprawling corporate groups.
The Reserve Bank of India says large non-banking financial companies and core investment companies, including Tata Sons, need to remain under its regulatory umbrella because they can create systemic risk when they sit atop sprawling corporate groups. Speaking at the NDTV World Summit, RBI Governor Sanjay Malhotra said such entities often raise money at the group level and rely on the wider balance sheet to support repayment, putting funds raised from the public through banks, corporate bonds and other channels at risk.
Malhotra said core investment companies that do not have direct or indirect access to public funds are exempt from registration. But where an entity falls within the RBI’s definition of an NBFC or CIC and can tap funds directly or indirectly, he said registration is required. If it is placed in the upper layer of the RBI’s regulatory framework, it must also be listed on stock exchanges.
The comments come after the central bank rejected Tata Sons’ application to give up its non-banking finance company registration, a move that has intensified expectations of a public listing for the Tata Group holding company. The RBI had classified Tata Sons in the upper layer in September 2022, and the company sought deregistration in March 2024 after repaying debt and arguing that it no longer needed to remain registered, according to reports by Moneycontrol, Business Standard and other outlets.
Business Standard reported that the RBI’s refusal means Tata Sons cannot escape the listing requirement that applies to upper-layer NBFCs, while other reports said the decision ends years of uncertainty over the company’s regulatory status. Tata Sons’ board has since moved to examine its options as the wider dispute within the conglomerate deepens, even as Malhotra reiterated that the central bank’s main task is to keep inflation under control while supporting long-term growth. He also said India’s macroeconomic fundamentals remain strong and high-frequency data point to resilient growth across sectors.
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