The Reserve Bank of India’s move to reject Tata Sons’ application for de-recognition has raised questions on whether the recent amendment to NBFC Upper Layer (NBFC-UL) regulation can be applied on it.
In 2021, the RBI’s scale-based regulatory framework required systemically important NBFC-UL to list on stock exchanges. When the RBI published its first Upper Layer list in September 2022, it included Tata Sons. The company was expected to list within three years. Instead, it repaid its debt and sought to exit the NBFC framework. Tata Sons repaid more than ₹21,000 crore, becoming debt-free and applied to surrender its NBFC registration in March 2024.
In June 2025, the RBI tightened the rules by making stock market listing mandatory for all NBFCs with assets exceeding ₹1-lakh crore. Earlier this month, the central bank rejected Tata Sons’ application to surrender its NBFC registration, effectively keeping it within the regulatory framework and on the path to a potential listing.
Tata Sons could contend that its application ought to have been considered under the regulatory framework prevailing when it was made and challenge the subsequent framework being applied retrospectively to its pending application, said Yash Dhruva, Partner, MDP Legal. The RBI, however, may contend that regulatory classification is continuing in nature and must be determined under the framework prevailing when the decision was taken, he added.
Siddartha Karnani, Partner, King Stubb & Kasiva, Advocates and Attorneys, said the most viable ground for Tata Sons could be the natural justice that the RBI’s rejection, reported as a brief letter stating the application ‘cannot be acceded to’, does not disclose reasons explaining why the Shanghvi Finance precedent was distinguished or which aspects of the application were found wanting.
A challenge built around the absence of a reasoned, speaking order is more likely to succeed than one built purely on retrospectivity, which will only compel the RBI to reconsider, not guarantee Tata Sons the outcome it wants, he added.
Akshaya Bhansali, Managing Partner, Mindspright Legal, said if transparency and strong corporate governance are the objects for the requirement for listing, they can be achieved through specific prescriptive requirements in the regulations. “Listing of a company is aimed at raising capital and ensuring free transferability of shareholding. Due to the incongruity in the objects, mandatory listing can be argued as not being the least intrusive means to achieve the goal of transparency and strong corporate governance while taking away the right of the company to decide regarding its listing,” she said.
Sonam Chandwani, Managing Partner, KS Legal & Associates, said the principles of non-retrospectivity, legitimate expectation and procedural fairness, along with the Article 14 requires that regulatory action must not be arbitrary would be relevant in Tata Sons case.
The court is likely to examine whether the amended provisions genuinely apply to pending applications and check if the RBI acted consistently and non-arbitrarily, she added.
Amit Kumar Nag, Partner, AQUILAW, said Tata Sons can point to the multi-year delay in deciding its de-recognition application, arguing that the RBI’s inaction followed by a rule change engineered rejection, which could be framed as arbitrary exercise of power.
A comparison with Shanghvi Finance, a similarly placed promoter holding company that was allowed to exit NBFC-UL status in 2023 after repaying its debt, could further support a claim of inconsistent treatment, he added.
Published on September 15, 2026
