Tata Sons, the holding company of the Tata Group, is reportedly undergoing a restructuring initiative to comply with regulations outlined by the Reserve Bank of India (RBI).
According to The Economic Times, the RBI has declined to provide any exemptions following an informal request to waive the requirement for non-banking finance companies (NBFCs) classified in the ‘upper layer’ to be listed. NBFCs in the ‘upper layer’ are deemed systemically important and have substantial interconnectedness with the financial system.
An official familiar with the matter told ET that Tata Sons is exploring various options to adhere to the regulations.
One potential approach being considered is the transfer of Tata Sons’ stake in Tata Capital, its financial services venture, to another entity. This move is believed to be a primary reason for Tata Sons being categorized in the ‘upper layer’. Being classified in the ‘upper layer’ can affect borrowing costs and other aspects of the company’s operations.
Tata Sons’ restructuring aims to ensure compliance with RBI regulations while mitigating any adverse impact on its business operations.
Under RBI rules, a ‘core investment company’ with assets below Rs 100 crore and no public fundraising activities can avoid classification as a CIC or an ‘upper layer’ NBFC, thus exempting it from public listing requirements.
Tata Sons, however, is registered as a CIC with the RBI and has been designated as an ‘upper layer’ NBFC, mandating adherence to strict regulatory frameworks and requiring public listing within three years of notification. The RBI notified Tata Sons of this requirement in September 2020.
