The Reserve Bank of India (RBI) has released draft amendment directions 10 April 2026 that propose a fundamental recast of the scale based regulatory (SBR) framework for non-banking financial companies (NBFCs) — and while the changes appear, at first glance, to tighten the noose around large financial entities, they may do little to resolve the most closely watched regulatory standoff in Indian corporate finance: whether Tata Sons Pvt Ltd, the holding company of the Tata conglomerate, will ultimately be forced to list on domestic stock exchanges.
The two draft documents, released on 10 April 2026, are the Reserve Bank of India (NBFC — Registration, Exemptions and Framework for Scale Based Regulation)
Second Amendment Directions, 2026, and RBI (NBFC — Concentration Risk Management)
Third Amendment Directions, 2026. Public comments are being invited from NBFCs, members of the public, and all other relevant stakeholders until 04 May 2026.
A Simpler Threshold Replaces the Existing Two-pronged Test
At the heart of the proposed changes is a significant simplification of how NBFCs get identified as belonging to the upper layer (NBFC-UL) — the tier that carries the most stringent regulatory requirements under the SBR Framework. Currently, two parallel criteria determine upper layer membership: the top-10 eligible NBFCs ranked by asset size, combined with a parametric scoring model that factors in multiple dimensions of systemic risk. This dual approach has often been criticised for its opacity and for the uncertainty it creates around whether any given entity is on the verge of being included in or excluded from the upper layer.
RBI’s proposed solution is to replace both criteria with a single, bright-line test: any NBFC with total assets of ₹1,00,000 crore or more would automatically qualify as an NBFC-UL. The intent, as stated in the draft directions, is to make the identification process transparent, simple, and absolute — for both the regulator and the regulated.
Why Listing Is Not Inevitable
The draft directions, for all their structural significance, do not resolve the most important variable in the Tata Sons saga.
As Moneylife has reported, Tata Sons is the only entity in the NBFC-UL category to have failed to list by the 30 September 2025 deadline and, simultaneously, to have applied to deregister as a finance company altogether — by closing out its debt and financial commitments to group entities.
This is a crucial distinction. The deregistration route, if successful, would reclassify Tata Sons as an unregistered core investment company (CIC), placing it entirely outside the SBR Framework and, consequently, outside the mandatory listing requirement that applies to NBFC-UL entities. The strategy involves relinquishing public funds in all forms — dropping finance-related businesses from its articles of association, including banking, merchant banking, lending, and the provision of guarantees — so as to convince RBI that it no longer meets the threshold for NBFC registration.
This approach was already visible some years ago.
As Moneylife reported in June 2024, Tata Sons had sold ₹9,362 crore worth of Tata Consultancy Services (TCS) shares to pay off loans, aiming to cut its then-debt of ₹21,909 crore in FY22-23. The broader intent was to present itself to RBI as a company that had shed its public borrowing profile sufficiently to be treated as an unregistered CIC.
The question Moneylife raised at the time remains pertinent today: would Tata Sons really repay all bank debt, inter-corporate deposits and off-balance sheet exposures — which, as of FY22-23, included more than ₹15,000 crore of off-balance sheet obligations, with nearly ₹11,400 crore of soft comfort provided to lenders on behalf of its subsidiaries?
The revised draft directions do not directly address this aspect. They focus on refining the methodology for identifying entities that qualify as NBFC-UL, without commenting on the treatment of entities that have applied to exit NBFC status altogether. The outcome of such deregistration applications continues to rest with RBI, and until a decision is taken, the eventual requirement to list remains uncertain.
Indeed, granting such an exemption would carry significant regulatory costs of its own.
As Moneylife has argued, an exemption from listing for what was then the fourth largest NBFC would call into question the robustness of RBI’s entire SBR framework — a framework introduced precisely because the collapse of IL&FS (Infrastructure Leasing & Financial Services Limited) in September 2018 demonstrated how the shadowy dealings of an unlisted holding company could remain undetected, leading to a severe systemic shock to the financial system.
Government-owned NBFCs Enter the Upper Layer
Alongside the asset-threshold reform, RBI has proposed a separate but equally significant change: bringing eligible government-owned NBFCs into the NBFC-UL for the first time. Under the existing framework, State-backed financial institutions have been confined to the base layer or middle layer, regardless of their asset size or systemic significance. RBI has now proposed to treat these entities on par with their private-sector counterparts, citing the principle of ownership-neutral regulation — the same principle that makes it difficult, in the regulator’s own framework, to justify treating Tata Sons differently from any other large, systemically important NBFC simply because it is owned by charitable trusts.
State Government Guarantees as Credit Risk Instruments
The third element of the proposed changes is more technical but operationally significant. The draft directions propose to permit all NBFC-UL entities to use state government guarantees as credit risk transfer instruments without any quantitative cap, subject to specified conditions. The proposed relaxation is expected to ease the regulatory treatment of guaranteed exposures and could benefit large infrastructure financiers in the NBFC-UL category.
The Tata Sons Impasse: Internal Divisions and Mounting Pressure
The regulatory uncertainty has also exposed deepening fissures within the Tata group’s own governance structure.
Moneylife has reported that momentum for a listing appears to be building even as Tata Trusts chairman Noel Tata has directed the holding company’s leadership to explore ways to keep it private.
Most significantly, Venu Srinivasan, vice-chairman of Tata Trusts, has publicly described a listing as ‘inevitable’ if RBI maintains Tata Sons’ classification as an NBFC-UL. He has argued that listing would enable the group to raise the large capital required for capital-intensive, technology-driven businesses in aviation, defence, semiconductors, batteries and electronics — sectors where internal resource generation has its limits. He also noted that a listing would provide an exit route for the Shapoorji Pallonji (SP) group, which holds an 18.37% stake in Tata Sons. This is the first time a sitting trustee has openly endorsed the idea, directly contradicting the Tata Trusts’ unanimous resolution in July 2025 to keep Tata Sons unlisted.
According to Moneylife, former defence secretary and non-Parsi trustee Vijay Singh has also indicated that he shares Mr Srinivasan’s assessment. He told
Moneylife that a unanimous resolution by the trusts against listing is now unlikely. It is notable that both trustees whose appointments have been challenged in Mehli Mistry’s recent affidavit are now on record as favouring a listing.
The Shapoorji Pallonji group has gone further, calling the listing not merely a regulatory compliance but a necessary evolution — one that would reinforce corporate governance, deepen transparency, and secure long-term value for all stakeholders. In a statement, Shapoorji Pallonji Mistry said that a public listing would strengthen board accountability, broaden the investor base, and expand the social and philanthropic impact that benefits the poorest sections of the country.
Meanwhile, Noel Tata had asked Tata Sons chairman N Chandrasekaran to examine options for remaining private in February 2026, while flagging concerns over debt levels and losses at key units such as Air India, Jaguar Land Rover and Tata Digital. A decision on extending Mr Chandrasekaran’s term has also been deferred.
Proponents of listing point out that it would bring market discipline, transparency and liquidity without diluting the Tata Trusts’ controlling 66% stake.
The new draft directions, whatever their ultimate form after the public consultation closes on 04 May 2026, will not by themselves settle the Tata Sons question. That answer lies in RBI’s as-yet-unpublished decision on the deregistration application — and in the financial trajectory of a conglomerate that continues to need capital even as it tries to convince its regulator it has moved beyond the need for oversight.
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