RBI governor Sanjay Malhotra says companies classified as upper-layer non-bank lenders must list, narrowing Tata Sons’ scope to resist a public offering.
Sanjay Malhotra has removed much of the ambiguity surrounding Tata Sons’ regulatory position, saying the Tata Group holding company must remain publicly listed while it continues to fall within the Reserve Bank of India’s upper-layer non-bank lender framework.
Speaking at an NDTV World Summit event on Friday, the Reserve Bank governor said non-banking financial companies and core investment companies are required to be registered because of the systemic risks they can pose. He said that if an entity falls within the RBI’s definition, has access to funds either directly or indirectly, and is classified in the upper layer, it is required to list. His comments came after weeks of debate over whether the central bank’s latest order explicitly demanded a market debut.
The clarification appears to undercut the argument made by Noel Tata, chair of Tata Trusts and a director of Tata Sons, who had said the RBI’s September 11 communication did not spell out a listing requirement. According to the company’s earlier position, the central bank had rejected Tata Sons’ bid to surrender its core investment company registration, but had not expressly ordered any particular follow-up step. Malhotra’s comments suggest the RBI sees the listing obligation as already triggered by the firm’s regulatory classification.
Tata Sons was placed in the upper layer of the RBI’s non-banking financial company framework in 2022 and told it would need to list within three years. The central bank’s decision in September to reject the group’s application to give up its core investment company status followed Tata Sons’ argument that it had reduced debt to zero and should no longer be treated as such. But the RBI said the request “cannot be acceded to”, according to reports, leaving the holding company exposed to the framework for systemically important lenders. Industry guidance on the RBI’s upper-layer rules says such firms must list on a recognised exchange within three years of being identified.
Malhotra also pointed to the wider policy rationale behind the rule, saying core investment companies sit atop corporate groups and can channel funds through subsidiaries, creating risk for money raised from banks, bonds and other sources. He declined to address a proposal reportedly floated by Noel Tata to merge two Tata Sons subsidiaries with the parent company, a move that could potentially affect the route to a public listing. Tata Sons’ board discussed the RBI’s stance at a meeting on September 17 and agreed to comply with the regulator’s requirements, though it did not decide on a listing timetable.
For now, the governor’s remarks appear to narrow the room for interpretation. What remains unclear is how the RBI would respond if Tata Sons continues to resist a stock market listing, or what enforcement steps, if any, might follow a prolonged delay.
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