Governor Malhotra Ties Tata Sons Listing to Public Funds

RBI Governor Sanjay Malhotra said on October 23 that an upper-layer core investment company with access to public funds is required to list. He was speaking at the NDTV World Summit in New Delhi, six weeks after the central bank refused Tata Sons’ bid to drop its CIC registration.

He would not discuss one regulated firm as a case. He then named Tata Sons among CICs that must register because they sit on group companies and use those balance sheets to raise and repay money.

Malhotra Recites the Listing Test for Holding Companies

Asked whether a firm could restructure its way out of a listing, Malhotra answered with the test, not a waiver. As long as the company is an NBFC on the RBI’s definition, is a CIC, and has access to funds, direct or indirect, it must be registered. If it is in the upper layer, it is required to list.

They sit on top of group companies where they leverage funds, they can leverage funds, they do leverage funds, and they use the balance sheets of the group companies to return those funds. The funds of the public, whether it is banks, whether it is through corporate bonds and other means, are at risk when these CICs do this kind of activity.

Sanjay Malhotra, Governor, Reserve Bank of India, at the NDTV World Summit

That is the second-order point. Tata Sons repaid its own borrowings and applied on March 28, 2024, to surrender its certificate of registration, arguing a zero-debt holding company should step outside the net. Malhotra’s reply is that public money can still sit in the pyramid through banks and bonds at group firms, even when the holding company itself shows no standalone debt.

The RBI’s own NBFC FAQs draw the same line. Public funds are not the same as public deposits. They include bank finance, inter-corporate deposits, commercial paper and debentures, and the indirect receipt of public funds through associates and group entities that can raise that money.

Only a CIC with no such access, he said, is allowed to stay unregistered. A June 2026 change also spares upper-layer NBFCs that are fully owned and controlled by the government from the listing duty. Tata Sons is not a government company.

Tata Sons Is Already in the Upper Layer

The RBI first put Tata Sons in the upper layer in September 2022. Scale-based rules give an upper-layer NBFC three years from identification to list, and they require listed-style disclosure even before the shares trade. That window ended on September 30, 2025. Tata Sons is still private.

On August 6, 2026, the central bank published the 2026-27 roster of 17 NBFCs in the Upper Layer, using financials as of March 31, 2026. Tata Sons Private Limited is number 9, tagged as a core investment company. A footnote said the name was listed without prejudice to a then-pending deregistration plea.

That plea is no longer pending. In a letter dated September 11, 2026, the RBI said it could not accede to the surrender request and told Tata Sons to comply with upper-layer rules. Those rules include listing. Revised 2025 directions also keep an upper-layer firm under the tighter regime for at least five years after it is classified, and they set the upper-layer line at asset size of ₹1 lakh crore or more.

THE HOLDING COMPANY AGAINST THE TESTS

Tata Capital Limited is on the same upper-layer list as a separate investment and credit company. The holding company problem is Tata Sons, not the lending arm.

The Trusts’ Plan to Merge Two Operating Companies

Tata Trusts, which say they hold 66% of Tata Sons, do not want a public share sale. On September 28 they sent the board a proposed merger of TESS and TCE, two wholly owned operating firms, into Tata Sons Private Limited. Chairman Noel Tata has told the board that a listing will destroy its character.

The Trusts say the merged company would be neither an NBFC nor a CIC. They point back to an older operating model. Tata Sons had its own businesses for almost 80 years of a 100-year life, they said, and Tata Consultancy Services was still a division of Tata Sons until it was demerged in 2004. After that split, they said, the RBI treated Tata Sons as a non-banking, non-financial company.

Sir Dorabji Tata Trust and Sir Ratan Tata Trust passed unanimous resolutions in July 2025 that every effort should be made to keep Tata Sons an unlisted private company. The September 28 paper is that effort in numbers.

THE TRUSTS’ MERGED-COMPANY MATHS

On income, the Trusts say operating revenue would be far larger than financial income, so the firm would fail the principal-business test for an NBFC. On the CIC test they say group investments would fall under 90% of net assets. They have not published the matching asset-side split for the 50-50 NBFC test, which looks at financial assets as a share of total assets, not only at the income mix.

Why a Bigger Book May Not End the Listing Duty

Folding two operating companies into Tata Sons makes the holding company larger, not smaller. If the merged firm is still an NBFC on the RBI’s definition, the ₹1 lakh crore upper-layer line is even easier to meet on a bigger book, and the listing duty can travel with it. That is the risk the merger does not erase on its own.

Malhotra did not ban a reorganisation. He said the listing duty lasts as long as the tests are still met. The Trusts’ paper is an attempt to fail those tests. It still has to clear the central bank, which already refused a simpler exit when Tata Sons tried to surrender the CIC certificate after paying off its own debt.

WHAT THE MERGER STILL HAS TO CLEAR

• Prior RBI consent: Combining real operating firms with an NBFC must follow the 2025 voluntary amalgamation directions, including a no-objection certificate before the deal proceeds.
• The 50-50 asset leg: Income can tilt operating while financial assets, mainly group shares, still dominate the balance sheet.
• Upper-layer size: If Tata Sons remains an NBFC, assets of ₹2.01 lakh crore already sit above ₹1 lakh crore, and a merger does not shrink that.
• Public funds through the group: Malhotra’s systemic-risk case is leverage on group balance sheets, which a holding-company merger does not switch off.
• A five-year lock: Once tagged upper layer, the tighter regime lasts at least five years even if a later year misses the size cut.

A drop out of the CIC box is not the same as a drop out of the NBFC box. An ordinary NBFC with a Tata-scale book would still be an upper-layer firm on the 2026 size rule, and the listing clause would still apply.

The Split Inside Bombay House Over Listing

The September 17 Tata Sons board meeting is the rupture the governor’s remarks now sit on. Directors moved to start complying with upper-layer rules, which include a listing, and they reappointed N. Chandrasekaran, the Tata Sons chairman, for a further term from February 2027. Noel Tata opposed both steps.

Trustees are split as well. Venu Srinivasan, a vice-chairman of Tata Trusts and a Tata Sons director, and trustee Vijay Singh filed complaints with the Maharashtra Charity Commissioner on September 25, seeking an inquiry into Sir Dorabji Tata Trust’s administration and into its role in Tata Sons’ commercial decisions. Srinivasan has said a September 16 circular tried to keep him from voting on listing.

Sir Dorabji Tata Trust, the largest single shareholder at 27.98%, filed its reply on October 19 and denied the misgovernance claims. Sir Ratan Tata Trust holds 23.56% and has been under a Charity Commissioner restraint that stopped trustee meetings, which in turn blocked a joint representative and left Tata Sons without a quorum for its annual general meeting.

THE PATH TO THE GOVERNOR’S REMARKS

1. September 2022: The RBI places Tata Sons in the upper layer, starting a three-year listing window.
2. March 28, 2024: Tata Sons applies to surrender its CIC certificate after repaying standalone debt.
3. September 30, 2025: The original listing window ends with the company still unlisted and the surrender plea still open.
4. June 2026: Upper-layer identification moves to a simple asset line of ₹1 lakh crore.
5. August 6, 2026: Tata Sons stays on the 17-name upper-layer list, with deregistration then still under examination.
6. September 11, 2026: The RBI refuses the surrender and tells the company to comply with upper-layer rules.
7. September 17, 2026: The Tata Sons board starts compliance steps and reappoints Chandrasekaran; Noel Tata opposes.
8. September 28, 2026: Tata Trusts propose merging TESS and TCE into Tata Sons.
9. October 23, 2026: Malhotra recites the listing test and names Tata Sons among CICs that must register.

Noel Tata, his son Neville Tata, lawyer Darius Khambata and trustee Bhaskar Bhat have accused Srinivasan and Singh of breaking with the Trusts’ long-held line against a listing. The Charity Commissioner’s file is now the parallel track to the RBI’s.

Shapoorji Pallonji Still Wants a Market Exit

The Shapoorji Pallonji group holds more than 18% of Tata Sons and has pushed for a listing as a way to sell a stake that does not otherwise trade. Chairman Shapoorji Pallonji Mistry has called a listing a social and moral imperative. For a leveraged minority holder, a public market is a cash door that an unlisted holding company does not offer.

Tata Trusts have kept the other door closed. On September 17 they restated that the Tata model has to be saved and asked the Tata Sons board to look at options other than listing.

The Tata Trusts reaffirm their position on the listing of Tata Sons, emphasising the need to safeguard the Tata Model.

Read the full statement: https://t.co/VfIb3b0B2n pic.twitter.com/1LP2VquKUp

— Tata Trusts (@tatatrusts) September 17, 2026

Six Parsi and Zoroastrian bodies wrote to Prime Minister Narendra Modi on October 7 in the same cause. The Bombay Parsi Punchayet, the Federation of Parsi Zoroastrian Anjumans of India, FEZANA, the Zoroastrian Trust Funds of Europe, the Global Council of Zoroastrians Trust and the World Zoroastrian Chamber of Commerce said any move that undercut the group’s altruistic character would harm India’s standing, and they framed the fight as more than a technical listing case.

Community pressure does not rewrite the NBFC directions. It does show why the Trusts treat a share sale as a change of character, not a compliance filing.

The Merger Still Needs an RBI No-Objection

Malhotra left the legal test where he found it. An upper-layer CIC that can reach public funds, including through group companies, must register and must list. Tata Sons is already on that list, with assets of ₹2.01 lakh crore, and the September 11 letter closed the simple deregistration route.

The Trusts’ merger is now the remaining bid to change the company’s nature so those labels no longer fit. It needs board approval and a prior no-objection from the same regulator that refused the last exit. Until that certificate exists, Tata Sons remains a core investment company in the upper layer, and the listing rule Malhotra recited still applies to it.

Disclaimer: This article is news reporting and analysis of RBI remarks, NBFC rules and Tata group statements. It is for information only and is not investment advice, a recommendation to buy or sell Tata group securities, or a forecast of any listing, share price or deal. Readers who may act on a possible Tata Sons share sale should consult a SEBI-registered investment adviser or other qualified securities professional. Figures, board positions and regulatory statuses are those in the cited RBI, Tata Trusts and speaker materials as of the dates given and can change as the merger proposal, Charity Commissioner process and any listing timetable move.