RBI puts Tata Sons on Upper Layer list, de-registration plea under review

Apart from Tata Sons, the RBI has classified 16 other NBFCs in the upper layer, bringing them under an enhanced regulatory framework. These include Bajaj Finance, Tata Capital, Aditya Birla Capital, L&T Finance, Mahindra & Mahindra Financial Services, and Shriram Finance.

Once an NBFC is categorised as NBFC-UL, it will be subject to enhanced regulatory requirement, at least for a period of five years from its classification in the layer, even in case it does not meet the (prescribed) criteria in the subsequent years. In other words, it will be eligible to move out of the enhanced regulatory framework only if it does not meet the criteria for classification for five consecutive years.

Tata Trusts divided over Tata Sons listing

Trustees of Tata Trusts, which hold 66% stake in Tata Sons, are divided on the issue of listing of Tata Sons.

While Tata Trusts Chairman Noel Tata and some former Tata Sons directors are against listing Tata Sons, two trustees of Tata trusts — Venu Srinivasan and Vijay Singh — have argued for listing of Tata Sons. Pallonji Mistry group which holds 18.3 per cent stake in Tata Sons is for the listing of Tata Sons.

According to a trustee of Tata Trusts, control, be it charitable trusts, was a workable proposition in earlier times but Tata Sons needs stability and a rigorous regulatory mechanism now. “The Tata Trusts have been fractious and turbulent in the recent past and there is no guarantee of a better future. I do not think listing will significantly affect the trusts which will retain their large shareholding, board seats etc. and will not lose their promoter status,” he said.

“A public listing would not only unlock value for minority shareholders but also equip Tata Sons with capital to sustain growth,” said another Tata Trusts trustee.

The matter of listing Tata Sons has been under consideration and discussion for a while now as the RBI regulations require Tata Sons to be listed on the stock exchanges as it is considered to be an upper layer non-banking finance company.

Large NBFCs face stricter RBI rules

The RBI replaced the previous methodology to determine NBFC-UL with a simple criterion that only NBFCs with assets of Rs 1 lakh crore or more will be classified as NBFC-UL. Although Tata Sons has had no direct access to public funds since repaying its debt in 2024, it remains an indirect recipient of public funds under the RBI’s definition because listed Tata companies, including Tata Steel, Tata Chemicals and Tata Power, hold equity stakes in it.

“A review of the criteria for identification of NBFC-UL was undertaken during 2025-26 and hence, the list of NBFC-UL for the year 2025-26 was not issued. Subsequent to the issue of the revised criteria, the list of NBFC-UL for the year 2026-27 has been prepared based on the revised criteria,” the RBI said.

According to the central bank’s Scale Based Regulation (SBR) framework, an NBFC-Upper Layer (NBFC-UL) is a non-banking financial company that the RBI identifies as requiring enhanced regulatory oversight because of its size, systemic importance, interconnectedness, and risk profile, using a prescribed scoring methodology.

If an NBFC is listed as NBFC-UL, it will have to maintain Common Equity Tier 1 (CET1) capital and stricter capital adequacy norms that are closer to those applicable to banks. It will have to follow stronger board oversight, mandatory board committees, stricter governance expectations, higher provisioning and compensation policies aligned with prudent risk management. NBFCs with assets of Rs 1 lakh crore or more are required to list on a stock exchange to enhance transparency and market discipline.

RBI’s list of upper layer NBFCs: