The Reserve Bank of India has turned down Tata Sons’ request to give up its non-banking finance company (NBFC) licence, Indian Express reported on Saturday. With the application rejected, Tata Sons will now have to adhere to the RBI’s rules governing upper-layer NBFCs, which include a mandatory stock market listing.

The central bank has asked Tata Sons to comply with regulations applicable to non-banking financial companies classified in the Upper Layer (NBFC-UL), according to the report. According to the RBI regulations, NBFCs placed in the Upper Layer needs to be listed on the stock exchanges within three years of their identification.

What did RBI tell Tata Sons?

Tata Sons had approached the RBI seeking to voluntarily surrender its Certificate of Registration (CoR) and sought classification as an unregistered Core Investment Company (CIC).

According to IE, the application was originally made on March 28, 2024, followed by several subsequent communications between Tata Sons and the central bank.

The RBI has now informed the company that its request for voluntary surrender of the registration cannot be accepted and asked it to take the necessary steps for full compliance with regulations applicable to an NBFC-UL, the report said.

The decision effectively revives the question of a potential Tata Sons initial public offering (IPO), an issue that has been under discussion since the company was brought within the central bank’s stricter regulatory framework.

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Under the RBI’s Scale Based Regulation framework, an NBFC classified in the Upper Layer must mandatorily list within three years of its identification. Such companies are also subject to enhanced requirements covering capital, governance, disclosures and risk management.

Tata Sons remained an Upper Layer NBFC

The RBI had continued to classify Tata Sons as an NBFC-UL even while its deregistration application was under consideration.

In its January 2025 list of Upper Layer NBFCs, the central bank identified Tata Sons as a Core Investment Company and specifically said its inclusion was without prejudice to the outcome of its deregistration application, which was then under examination.

The RBI framework also states that once an NBFC enters the Upper Layer, it generally remains subject to enhanced regulatory requirements for at least five years, even if it subsequently falls below the criteria used for its classification.

According to the Indian Express report, Tata Sons had repaid its debt in 2024 and no longer had direct access to public funds. However, it continued to qualify as an indirect recipient of public funds under the RBI definition as listed Tata Group companies hold equity in the holding company.

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Why a Tata Sons listing matters

A listing of Tata Sons could have significant implications for the ownership structure of one of India’s largest corporate groups.

Tata Trusts owns around 66% of Tata Sons, giving the charitable trusts effective control over the holding company. The Shapoorji Pallonji (SP) Group, meanwhile, holds around 18.3%.

A public listing could provide the SP Group an avenue to monetise part of its holding in Tata Sons and raise funds, the report said.

The question of listing has also reportedly divided stakeholders within Tata Trusts. According to IE, Tata Trusts Chairman Noel Tata and some former Tata Sons directors have favoured keeping the holding company private, while trustees Venu Srinivasan and Vijay Singh have supported a listing. The SP Group has also backed the move.

The latest RBI decision, however, places the focus back on regulatory compliance. With the deregistration route reportedly rejected, Tata Sons will now have to determine how it complies with the requirements governing Upper Layer NBFCs, including the RBI’s mandatory listing provision.