Tata Sons Listing: RBI Governor Says Large NBFCs Using Group Funds Must Go Public

Reserve Bank of India (RBI) Governor Sanjay Malhotra has defended the central bank’s decision to classify Tata Sons as an upper-layer non-banking financial company (NBFC), saying large financial entities that use group balance sheets and have access to public funds must be regulated and comply with mandatory listing requirements.

Speaking at the NDTV World Summit on Friday, Malhotra said large NBFCs and core investment companies (CICs) can pose systemic risks because they sit at the top of corporate groups, raise funds and use the financial strength of their subsidiaries and other group companies to support their obligations.

“ The funds of the public,” whether raised through corporate bonds, banks or other channels, are exposed to such risks, he said, explaining the need for regulatory oversight.

Malhotra clarified that CICs without direct or indirect access to public funds are exempt from registration. However, entities that meet the RBI’s definition of an NBFC or CIC and have access to such funds must register with the central bank. Those classified in the upper layer must also list on stock exchanges.

The clarification comes after the RBI rejected Tata Sons’ application to surrender its NBFC registration last month, strengthening the prospect of a public listing for the holding company of the Tata Group, whose businesses span sectors from salt and steel to software and automobiles.

Tata Sons was placed in the upper layer in September 2022 and applied to surrender its registration in March 2024. It had repaid its debt in an effort to qualify for deregistration. The company’s board has since taken steps linked to a possible listing, while exploring other options amid differences within the conglomerate.

On the broader economy, Malhotra said India’s growth momentum remains resilient, citing cement and steel sales, credit growth, tax collections and automobile sales. He said inflation remains within the RBI’s tolerance band, though food and fuel prices continue to pose supply-side challenges. The average inflation projection for the current year stands at 5.1 per cent, he said.

On the rupee, the governor stressed that the RBI does not target a specific exchange-rate level. Its priority is to maintain orderly conditions in the foreign exchange market and contain excessive volatility.