In what could provide a breather for Tata Sons, the holding company of the Tata Group, the Reserve Bank of India (RBI) has seemingly removed a contentious definition of indirect public funds received by non-bank financiers. The previous definition, if implemented, would have forced Tata Sons to make an initial public offer (IPO), a prospect resisted by many of its top executives as well as its majority-owner Tata Trusts.
On 29 April, the central bank had defined indirect receipts of public funds as "funds received not directly but through associates and group entities which have access to public funds", a definition which was seen as eventually leading to an IPO of Tata Sons.
The reason: Publicly listed companies such as Tata Chemicals, Tata Steel, and Tata Power hold equity in Tata Sons, which would make the holding company an indirect recipient of public funds. As of 31 March 2025, Tata Steel held 12,375 shares of Tata Sons, while Tata Chemicals and Tata Power owned 10,237 and 6,673 shares, respectively.
That definition of indirect access to public funds is missing from the updated guidelines released on Wednesday.
While RBI has said what public funds mean, the updated circular no longer specifies what indirect access means. It says public funds include funds raised either directly or indirectly through public deposits, inter-corporate deposits, bank finance and all funds received from outside sources such as funds raised by issue of commercial papers, debentures etc., but excludes funds raised by issue of instruments compulsorily convertible into equity shares within a period not exceeding five years from the date of issue.
'Unique case'
"This is a unique case," said R. Gandhi, former deputy governor, RBI. "Moreover, core investment companies (CICs) need to have greater elbow room than regular NBFCs and, therefore, there should be certain leeway available. I am not on the side of those who believe in the listing of CICs," said Gandhi.
In 2022, RBI had released a list of so-called upper-layer non-banks, giving them three years to get listed. Many from that list, such as Tata Capital and HDB Financial Services, got listed in time. Tata Sons remains the only company in that list to remain private.
Tata Sons turned debt-free in 2024, as it worked to avoid a public listing.
As per RBI’s circular from 10 March, a core investment company can remain unregistered on two occasions. First, if it has an asset size below ₹100 crore, irrespective of whether accessing public funds or not; and second, with an asset size of ₹100 crore and above, but not accessing public funds.
If Wednesday's circular is interpreted as meaning Tata Sons does not have access to indirect public funds — it repaid debt so it no longer has direct access — then even with its asset book of over ₹100 crore, it need not be a registered CIC and therefore not be an upper layer NBFC required to list.
Tata Sons had total assets of ₹1.75 trillion on a standalone basis as on 31 March 2025, and Wednesday's RBI update removes the 'indirect public funds' hurdle.
Exemptions
The updated circular leaves the definition of indirect public funds open to RBI’s interpretation, experts said.
“The RBI has been trying to find a solution to this. That Tata Sons does not fit any of these descriptions is something the regulator acknowledges, and today’s circular shows that,” said a person aware of the discussions. “The RBI understands that it cannot apply the same set of regulations here because of the structure.”
The regulator still can exempt companies from IPOs on a case-to-case basis, Gandhi had told Mint in April.
A CIC is a non-bank whose business is to acquire shares and securities, and hold at least 90% of its net assets in the form of investments in equity shares, preference shares, bonds, debentures, debt or loans in group companies.
RBI regulations classify NBFCs into four layers based on their size, activity and perceived risks. Those in the upper layer are subject to greater regulatory scrutiny than their smaller peers. The list has large and systemically important names such as Tata Sons, LIC Housing Finance and Shriram Finance, with Tata Sons featuring here since the first list came in 2022. This was subsequently revised in 2023, and then in 2025 with a count of 15 companies.
RBI is yet to revise that list. However, a list of all non-banks registered with the central bank shows Tata Sons remained in the upper layer even in the FY26 list released on 10 April. The list names 9,075 non-banks, including 59 CICs.