RBI's Draft on NBFC-ULs: A Double-Edged Sword for CICs

The Reserve Bank of India's recent draft on the regulation of upper layer non-bank finance companies (NBFCs) has sparked concerns, especially affecting core investment companies (CICs). The rising compliance costs could disproportionately impact these firms, according to a report by India Ratings released on Monday.

Mandatory listing requirements proposed in the draft have raised alarms for several CICs, particularly those structured for promoter-level capital allocation rather than for public market access. Tata Sons, with over Rs 1.7 lakh crore in assets as of March 2025, stands at the center of this debate amid speculation over its listing. The RBI's draft suggests that entities with assets under management (AUM) above Rs 1 lakh crore be classified as NBFC-ULs, extending this requirement even to state-run companies.

India Ratings highlighted that the new framework might not significantly impact the broader NBFC sector but classifies CICs as distinct outliers. The compliance costs and listing requirements could pose challenges, especially for CICs with consolidated assets meeting or exceeding the proposed threshold. Concerns are growing over the application of the large exposures framework, given the concentrated investments in step-down subsidiaries. As discussions continue, the final draft is expected to address these operational and regulatory challenges.