On Wednesday, the Central Bank of India has implemented a new rule for ‘systemically important non-banking financial companies’ (NBFCs), which is related to ‘upper-layer NBFCs’. Under this, companies with assets of more than Rs 1 lakh crore will have to undergo public listing of shares. With this step, the possibility of the parent company of the country’s largest business group remaining private has almost ended.
In doing so, the bank rejected the industry’s suggestion to increase this limit to Rs 2.5 lakh crore. The bank also said that the regulator will identify companies falling in this category every year – a condition it first stated in the scale-based regulation issued in 2002. However, the regulator did not release any list of upper-layer NBFCs in FY 2026.
Amidst all these things, if Tata Sons’ IPO comes, then it can be the father of all IPOs in the country. We are not saying this just like that. If we look at the valuation, if Tata Sons also brings an initial IPO of 5 percent, then its size can be around Rs 60 to 70 thousand crores. Which is equal to the total IPO size of Jio and NSE IPOs. Now you can understand that preparing the draft of IPO for Tata Sons will not be easy.
Why is RBI’s new circular important?
Among the hundreds of technical circulars issued by the Central Bank, this particular circular is important because there is a special question regarding the upper-layer NBFC regulation – will Tata Group’s parent company ‘Tata Sons’ have to go for public listing? Wednesday’s circular finalized the regulatory limits that the Reserve Bank of India (RBI) had first proposed in a draft circular in April. Earlier, inclusion as an upper-layer NBFC depended on whether the company was among the top 10 companies in the country in terms of asset size or not.
Question on Tata Sons’ listing
Tata Sons, the unlisted holding company of this big group that does business ranging from salt to semiconductors, was directed to get listed by the original deadline of September 2025. In January last year, when the RBI released the list of upper-layer NBFCs to be listed, it had said that Tata Sons’s application to surrender its NBFC license was being considered. Since then, the regulator has been completely silent on the matter.
Tata Trusts, which holds majority stake in Tata Sons, has passed a resolution stating that the company should remain unlisted. Subsequently, its two vice chairmen—Venu Srinivasan and Vijay Singh—have said in public statements that the listing would be a good outcome. His statements have led to differences among the trustees, including Trust Chairman Noel Tata, who has strongly opposed the listing.
Listing may have an impact
The public listing of Tata Sons could have far-reaching implications because its shareholders control its board. Its largest owners, i.e. the public charitable trusts under Tata Trusts, have special rights. This is because as a private limited company, these facilities are available in its structure. If the company is converted to a public limited structure – which is required for public listing – these facilities will be lost.
Currently, for important decisions, the approval (vote) of the nominee directors of Tata Trusts is required, whereas in a public company, all the board members will have equal votes, due to which the main means of controlling the trusts will be eliminated. The new rules will come into effect from the date when RBI will release the new list of companies which will fall in the ‘upper layer’ category.
RBI said that the upper layer will include those NBFCs whose asset size (asset size) is Rs 1 lakh crore or more as per the latest audited balance sheet of the financial year. In the final guidelines issued on how to identify NBFC-UL entities, the central bank simplified the earlier multi-parameter approach and rejected suggestions to increase the asset limit to Rs 2.5 lakh crore.
Tata Sons’ asset base
According to ET report, the standalone asset size of Tata Sons is around Rs 1.9 lakh crore. The consolidated market capitalization of Tata Group is more than $300 billion. Senior group officials associated with this matter said that due to regulatory changes, the possibility of listing of Tata Sons remains in future, although its impact will have to be studied closely. However, no official statement has come from Tata Group regarding the new rules of RBI.
RBI said it had received suggestions to increase the threshold to at least Rs 2.5 lakh crore as well as include additional parameters such as profitability and asset quality. However, it rejected the proposal and said the Rs 1 lakh crore limit was decided based on the current profile of the sector and analysis of existing upper-layer NBFCs.
Suggestions were given to RBI
The suggestions given to RBI argued that asset size alone does not fully reflect a company’s importance to the system, hence it should also include parameters reflecting interconnectedness and systemic risk. It also said that any revised approach should take into account the company’s risk profile, leverage, interconnectedness and other supervisory factors.
The regulator has also taken steps towards making the framework more transparent by removing the earlier parametric scoring method and adopting clear asset size criteria. He says that this is a very good measure of importance for the system.
Additionally, RBI said that listing will not be mandatory for government-owned NBFCs (which are fully owned and controlled by the state) as their objective is development related.
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