RBI’s New NBFC Draft: Compliance and Listing Challenges for Core Investment Companies

The Reserve Bank of India’s draft framework for regulating upper-layer non-banking finance companies (NBFCs) is poised to impose disproportionate compliance burdens on core investment companies (CICs), particularly due to mandatory listing requirements and an assets-under-management-based regulatory approach that may not align with their operational models.

The draft, released by the RBI in April 2026, proposes to classify certain large NBFCs under an “upper layer” based on size, complexity, and systemic importance, triggering enhanced prudential norms. While intended to strengthen oversight of systemically significant non-bank entities, the framework risks overreach by applying stringent rules to CICs—entities primarily engaged in holding equity stakes in group companies rather than public lending or deposit-taking activities.

According to analysis by India Ratings and Research, the proposed AUM (assets under management)-based threshold for determining upper-layer status does not adequately distinguish between lending-focused NBFCs and investment holding companies. Many CICs, including prominent conglomerate-owned entities like Tata Sons, could fall under the upper layer despite having minimal public exposure or systemic risk profiles tied to traditional financial intermediation.

One of the most contentious elements of the draft is the mandatory listing requirement for upper-layer NBFCs. For CICs that have deliberately avoided public markets to maintain strategic control over group holdings, this provision could force costly and disruptive structural changes. Compliance with listing norms—including enhanced disclosures, quarterly reporting, corporate governance standards, and minimum public shareholding—would significantly increase administrative and financial burdens.

Industry experts warn that such requirements may not be proportionate to the actual risks posed by CICs. Unlike NBFCs engaged in credit extension, asset financing, or public deposit mobilization, CICs typically do not interact with retail savers or contribute directly to credit cycles. Their primary function is intra-group investment, making public market access and associated disclosures less relevant to their core purpose.

The RBI’s consultation paper acknowledges concerns about proportionality but maintains that size-based thresholds are necessary to capture entities with potential systemic footprint. However, critics argue that the current draft fails to incorporate activity-based risk assessment, leading to a one-size-fits-all approach that could stifle legitimate holding company structures.

Tata Sons, a major CIC and the holding entity for the Tata Group, has not publicly commented on the draft as of April 2026. However, analysts note that any move toward mandatory listing would require significant restructuring of its ownership framework, potentially affecting governance arrangements across its portfolio companies.

India Ratings has urged the RBI to consider alternative metrics—such as leverage, intergroup exposure, or reliance on wholesale funding—rather than relying solely on AUM. The agency suggests that a hybrid model incorporating both size and activity-based indicators would better target entities posing genuine systemic risk while avoiding unnecessary regulatory pressure on passive investment holders.

The RBI is expected to review feedback from stakeholders before finalizing the framework later in 2026. Until then, CICs and industry associations continue to advocate for a revised approach that distinguishes between financial intermediaries and investment holding entities, emphasizing that regulatory intensity should mirror actual risk profiles rather than asset size alone.