RBI's NBFC Rule Change Explained: What Draft Norms Mean For Tata Sons And Its IPO

RBI proposes asset size-based rules for upper layer NBFCs, including PSUs, possibly reshaping listing norms as Tata Sons IPO debate intensifies with Mistry backing listing.

The Reserve Bank of India (RBI) has proposed to revamp how upper-layer non-banking financial companies (NBFC-UL) are identified. The central bank on Friday pitched for an asset-size-based approach as against the earlier parametric system and inclusion of state-run entities.

The draft framework, released on April 10, proposes a shift to a simpler, asset-size-based classification for NBFCs and the inclusion of government-owned entities in the upper layer. While this may appear as a technical regulatory tweak, it could materially change the compliance landscape for large entities like Tata Sons, which is expected to be listed soon.

What has RBI proposed?

As per the draft ‘Reserve Bank of India (Non-Banking Financial Companies’ Registration, Exemptions and Framework for Scale Based Regulation) Second Amendment Directions, 2026′, the RBI has suggested replacing the current parametric scoring system with a clear asset-size threshold:

NBFCs with assets of Rs 1 lakh crore or more will be classified as upper layer (NBFC-UL)

Government-owned NBFCs, earlier excluded, will now be eligible for inclusion

Upper-layer NBFCs may also get greater flexibility in using state guarantees for risk transfer

The move is aimed at making the framework more transparent, ownership-neutral and easier to implement.

“With a view to adopt a transparent, simple and absolute criteria for identification of NBFC-UL, it is proposed to replace the existing methodology with asset size criteria, which is currently proposed as Rs 1,00,000 crore and above," the draft put on the RBI website said.

Why does NBFC-UL status matter?

Being classified as an upper-layer NBFC comes with stricter regulations, including enhanced governance norms, tighter supervision, and mandatory listing requirement for top entities.

Under existing rules, the top 15 NBFC-UL entities are required to list on stock exchanges. This is where Tata Sons comes into the spotlight.

Where does Tata Sons stand?

Tata Sons, classified as a Core Investment Company (CIC), has asset size of around Rs 1.75 lakh crore (as of March 2025), featured in the NBFC upper-layer list, and missed the October 2025 listing deadline.

This has triggered ongoing discussions around a potential IPO, even as the company has explored regulatory clarity and possible exemptions.

How the new rules could change the equation

The proposed changes may alter the composition of the upper layer list in two key ways:

1. Inclusion of PSU NBFCs

Earlier, government-owned NBFCs were excluded from the upper layer. Their inclusion now means more large entities will enter the NBFC-UL pool and the ranking of top-15 entities could change.

This could potentially push some private entities out of the mandatory listing bracket, depending on final rankings.

2. Simpler, absolute criteria

The shift to an asset-based threshold reduces subjectivity. However, Tata Sons still clearly qualifies based on size, and the key question is whether it remains in the top 15 after PSU inclusion.

Does this mean Tata Sons will be listed soon?

If Tata Sons continues to remain among the top 15 NBFC-UL entities, the listing requirement will still apply. If the inclusion of large PSU NBFCs alters rankings, there is a possibility of regulatory relief.

In other words, the draft does not automatically exempt Tata Sons.

What happens next?

The draft is open for feedback before finalisation. The final list of NBFC-UL entities will be recalibrated under new rules. Market participants will closely watch whether Tata Sons retains its position in the top 15.

However, Shapoorji Pallonji Mistry, who holds about 18 per cent stake in India’s largest private conglomerate Tata group, on Friday reiterated his push for the listing of Tata Sons, saying that “it is not merely a regulatory compliance but a necessary evolution".

In a media statement, Mistry said that a timely listing of Tata Sons is not merely a matter of regulatory compliance but a step that would reinforce the foundational principles of the Tata Group.

“As I have stated earlier, we would like to reiterate that a timely listing of Tata Sons is not merely a regulatory compliance but a necessary evolution. One that will reinforce corporate governance, deepen transparency and accountability. These form the very foundation of the Tata Group. To date, no clear, evidence-based case has been presented to explain how a public listing would materially damage the interests of the trusts or reduce their ability to serve beneficiaries," Shapoorji Pallonji Mistry said in the statement.