The Reserve Bank of India has announced the list of non-banking finance companies (NBFCs) in the upper layer under scale-based regulation for the year 2024-25, adding Tata Capital to the list to the15th position.
The new list also retains Tata Sons, despite its application to cancel its NBFC licence is still pending with the regulator. Apart from Tata Capital, the updated list has 15 other non-banks including LIC Housing Finance, Bajaj Finance, Shriram Finance and Tata Sons among others.
The decision to retain Tata Sons, the holding company of the largest corporate group registered with the RBI as a core investment company of the Tata Group, is interesting. It is expected to go public by September this year, something the company has traditionally been opposed to.
To avoid listing, the company has reduced its debt massively through last year—from Rs 25,000 crore to just about Rs 3,000 crore now. Having minimal debt is one of the conditions to escape public listing.
Another mandatory condition for listing is if the said NFBC is taking deposits from the public. Tata Sons is not a deposit taking entity. However, the RBI said in a statement on Thursday that “inclusion of Tata Sons in the list is without prejudice to the outcome of its application for de-registration, which is under examination.
”Despite qualifying for identification as an upper layer non-bank, Piramal Enterprises is not included in the list in the current review due to ongoing reorganisation in the business group, RBI said.
The RBI had issued the scale-based regulation framework in October 2021, which categorises NBFCs in the base layer, middle layer, upper layer and top layer. Also, the regulation gives the methodology to identify NBFCs in the upper layer as per their asset size and scoring methodology.
Once an NBFC is classified as upper layer NBFC, it will be subjected 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 parametric criteria in the subsequent years.
Others in the updated list includes: Cholamandalam Investment and Finance Company (non-deposit taking), L&T Finance(non-deposit taking), Mahindra & Mahindra Financial Services, Aditya Birla Finance (non-deposit taking), Piramal Capital & Housing Finance (non-deposit taking), PNB Housing Finance, HDB Financial Services (non-deposit taking), Sammaan Capital, formerly Indiabulls Housing Finance (non-deposit taking), Muthoot Finance (non-deposit taking) and Bajaj Housing Finance (non-deposit taking).