MUMBAI: In a major setback for Noel Tata, the chairman of the Tata Trusts that owns more than two-thirds of Tata Sons, the Reserve Bank is learnt to have rejected its application seeking to cancel the shadow banking licence, after 30 months of filing it, well in a landscape where the regulatory goalposts keep changing like hot sand dunes!
Way back in March 2024, Tata Sons had applied to RBI to cancel its licence as a registered non-banking core investment firm. That application was based on the then prevailing regulatory requirement of not having any exposure to public funds/debt by way of public deposits.
In a letter to Saurabh Agarwal, the chief financial officer of Tata Sons, the RBI said, “please refer to your letter of application dated March 28, 2024 that stated that Tata Sons Pvt Ltd, would fulfil the criteria prescribed for being classified as an unregistered core investment company, and your several subsequent correspondences on the subject.”
“After considering the above and examining all the relevant factors, we advise that your request for voluntary surrender of CoR for being classified as an unregistered CIC, cannot be acceded to,” the RBI said.
“As such, we advise you to take necessary actions to ensure full compliance with all guidelines/instructions, as applicable to NBFC-upper layer issued by the RBI, immediately,” the central bank said.
The holding company of the $290-billion Tata Group, before the filing the application to cancel its NBFC licence, had around Rs 22,000 crore in public debt, which by March 2023 it had cleared and became a net debt-free entity. The group did so as the then RBI rules governing large shadow banks, amended in October 2022, mandated a large NBFC/upper layer NBFC if it wanted to remain a private entity, it should not have any public debt, if not get publicly listed by September 2025.
But those rules were framed under the then RBI governor Shaktikanta Das and much waters have flown down the Mumbai drains since then. And then came the current governor Sanjay Malhotra—both civil servants—and the norms governing upper layer NBFC went for a complete overhaul wherein the key condition became the assets under management, which the Mint Road mandarins a arbitrarily pegged at Rs 1 trillion as they did not offer any rationale for this number. Unfortunately or not, Tat Sons had an AUM of Rs 1.75 trillion as of March 2026 on a standalone basis and close to Rs 7 trillion on a consolidated basis.
Significantly again, the RBI norms mandating public listing do not speak about the benefits of doing so, something so starkly clear in a capital market that’s known for more rule-breaking than following the rules as many a large companies continue to keep investors and the regulator in the dark.
If the reported rejection is correct, this means Tata Sons will have to go public with an initial public offering, which its largest outside shareholder SP Group, which owns 18.6%, wants as it desperately seek to raise funds to pay back its debt that runs into at least Rs 50,000 crore.
For Tata Sons, the directive could mean tighter scrutiny of its balance-sheet, investment structures, risk-management systems, corporate governance and other regulatory processes. As an upper layer NBFC, it will be subject to a more stringent regulatory framework, reflecting RBI’s assessment of the potential systemic importance of large financial entities.