When Sanjay Malhotra, Governor of the Reserve Bank of India, was asked about Tata Sons at a media summit last month, he declined to discuss a specific company. Instead, he explained the rule and the reason for it. That is where this debate should begin, because the question is not about one business house. It is about the financial system’s safety. After four decades in banking, I believe the regulator has the better argument.

A core investment company is a holding company that mainly owns shares in its own group companies, and the RBI regulates it as a non-banking financial company. The largest NBFCs sit in the upper layer and must list within three years. Tata Sons entered that layer in September 2022, so its deadline was September 2025. Instead, it prepaid more than Rs 21,000 crore of debt and applied to surrender its registration. In September, the RBI said no. With standalone assets above Rs 2 lakh crore, Tata Sons is well past the Rs 1 lakh crore threshold.

The RBI Governor’s reasoning matters more than the mechanics. Such companies sit atop their groups, leverage funds and rely on the balance sheets of group companies to repay them.........

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