The revised framework replaces the RBI’s earlier parametric scoring system with a more straightforward asset-size criterion. Any NBFC with assets of Rs 1 lakh crore or greater will qualify for Upper Layer classification, contingent upon annual identification by the RBI.
For Tata Sons, this change is crucial. Its standalone assets were approximately Rs 1.75 lakh crore as of FY25, significantly surpassing the threshold. Previously, classification was based on multiple aspects including size, leverage, interconnectedness, and complexity. The new regulations simplify this by making asset size the primary determinant.
Notably, the RBI circular lacks any specific exemption for Tata Sons, nor does it provide a carve-out for Core Investment Companies (CICs) that would exempt them from the Upper Layer classification or associated listing requirements.
The key issue now: deregistration takes centre stage
The discussion is no longer whether Tata Sons exceeds the Upper Layer threshold; by size, it evidently does.
The focus has now shifted to its application for surrendering its NBFC or CIC registration, which would effectively detach it from the regulatory regime that triggers listing obligations. RBI Governor Sanjay Malhotra has mentioned that this request is under review and that the updated Upper Layer list will be published separately.
Experts note that the revised framework effectively delineates two often-confused questions: first, whether an entity qualifies as an NBFC/CIC, and second, whether it meets the Rs 1 lakh crore threshold for Upper Layer classification after already being recognized as an NBFC.
“The asset threshold question seems resolved,” stated Abizer Diwanji, Founder of NeoStrat Advisors. “If you’re an NBFC with assets of Rs 1 lakh crore or above, then the Upper Layer regulations apply. The real issue is whether Tata Sons qualifies as a CIC/NBFC based on the public funds usage, directly or indirectly.”
Why the market is watching closely
Tata Sons was designated as an Upper Layer NBFC in 2022. Under the RBI’s scale-based regulatory framework, such entities encounter stricter oversight and listing expectations.
Since then, the company has been exploring regulatory avenues to maintain a closely held holding structure rather than shifting toward public listing.
Many legal and regulatory experts believe the updated framework clears much of the ambiguity surrounding asset-size classification. According to Diwanji, once an entity is confirmed as an NBFC and surpasses the Rs 1 lakh crore threshold, the RBI’s leeway diminishes significantly.
“If you are an NBFC at Rs 1 lakh crore or more, you are categorized as an Upper Layer NBFC. There’s no dispute,” he asserted. “The crux of the matter is whether you are an NBFC based on public funds involvement.”
CNBC-TV18 has learned that the RBI is still finalizing the upcoming Upper Layer NBFC list, with delays attributed to the ongoing review of the adjusted framework. Sources also indicate that this process relies on audited FY26 financial statements from over 9,000 NBFCs, with data collection and validation typically taking months post-financial year-end. However, close sources to the RBI clarify that decisions regarding Tata Sons’ deregistration will be made on a case-by-case basis.
Bull vs Bear case for Tata Sons Listing
On the supportive side, some analysts view the removal of the explicit definition of “indirect public funds” as significant. The prior draft had raised concerns that funds passing through group entities with access to public money could be classified as indirect public funds, complicating the situation for a debt-free holding company. With that definition now omitted, it is argued that a company without direct public borrowings should not be automatically considered reliant on public funds.
Another mildly supportive factor is the elimination of the automatic inclusion rule for the top 10 NBFCs into the Upper Layer. This shift is seen by some as a move away from blanket classifications to a more case-specific regulatory method.
Tata Sons also remains debt-free since FY24 and has no direct public borrowings, further supporting the claim that it does not bear traditional NBFC funding risks.
However, Diwanji warns against overinterpreting the removal of specific related-party language from the draft regulations.
He maintains that the RBI’s overarching principle remains intact. Entities can still be evaluated on their access to public funds, whether directly or indirectly. “Whether it involves a related party should not matter if public funds are ultimately involved,” he remarked.
He argues that the removal of precise wording does not inherently bolster Tata Sons’ position. Rather, it redirects focus back to how the holding company financed its investments and if public funds can be linked, directly or indirectly, to those assets.
Nevertheless, the structural limitations within the framework persist and continue to pose challenges. The Rs 1 lakh crore asset threshold for Upper Layer classification remains intact, with Tata Sons’ standalone assets of around Rs 1.75 lakh crore clearly above this level. Additionally, there is no specific exemption for Core Investment Companies in the final regulations, indicating that CICs are not automatically excluded from the Upper Layer framework.
The ongoing regulatory question is whether Tata Sons meets the criteria for CIC/NBFC under the RBI’s public funds assessment, an evaluation that is specific to the company’s funding structure and balance sheet.
Diwanji disagrees with the notion that the new framework provides substantial leeway regarding Upper Layer classification itself. In his opinion, the RBI’s focus is primarily on determining whether an entity qualifies as a CIC/NBFC under the public funds criterion.
“The discretion lies in whether you are a CIC entity and whether public funds have been utilized, directly or indirectly,” he stated. “Once that is established and the asset threshold is surpassed, the framework is relatively clear.”
What happens next
Three forthcoming developments are critical. The first is the RBI’s updated FY27 Upper Layer NBFC list. The second is the decision regarding Tata Sons’ deregistration application. The third pertains to any further regulatory clarifications concerning the treatment of Core Investment Companies. Until these matters are resolved, uncertainty remains.
The RBI’s revised rules do not directly enforce a Tata Sons IPO, nor do they finalize the company’s deregistration application. However, they clarify that the asset-size test is no longer the main area of ambiguity. With standalone assets of approximately Rs 1.75 lakh crore, Tata Sons comfortably exceeds the new Upper Layer threshold.
The remaining query is whether the RBI ultimately determines that Tata Sons is encompassed within the CIC/NBFC framework based on its use of public funds, either directly or indirectly. If affirmative, the journey to Upper Layer classification becomes notably clearer. Conversely, if the RBI accepts Tata Sons’ deregistration request, the discussion around listing may become largely moot.
