Way back in 1991, in a decisive and hearteningly contrarian move, India opened its economy sector by sector and did more. It gave each space a regulator of its own to protect the respective defined person across different time spans. That’s precisely why Reserve Bank of India (RBI) protects depositors, Securities and Exchange Board of India (SEBI) superintends investors, Insurance Regulatory and Development Authority of India (IRDAI) takes care of policyholders, Telecom Regulatory Authority of India (TRAI) protects telecom consumers, Real Estate (Regulation and Development) Act, 2016 (RERA) safeguards homebuyers, Food Safety and Standards Authority of India (FSSAI) ensures food safety, Competition Commission of India (CCI) monitors competition, and the Insolvency and Bankruptcy Board of India (IBBI) shelters creditors. In each case, the regulator’s power necessarily emanates from the person it protects. Needless to say, where no such person exists, this power has no basis whatsoever to mandate any blanket action, whichever the regulator at the helm.When regulators touch ownershipOf course, few regulators do mandate binding norms for ownership, and for good reason. A new private bank, for instance, must list. But that condition is embeddedIllustration: Pariplab Chakraborty.into the licence itself, so the promoter is aware of it before investing a rupee. More importantly, public money is integral to such an enterprise, viz. depositors’ savings in a bank or policyholders’ premiums in an insurer, so the mandate makes sense.However, in my view, no regulator can force a company to list if the company is not founded on public money, still less when rules are changed midway. Let’s dive deeper into the Tata Sons context to decode this dictum.A new toll on an old roadFounded in 1917, Tata Sons registered with the RBI as a Core Investment Company (CIC), the holding company of the Tata group, which does not accept public money. No listing condition was thus attached at the time of registration.Then, in October 2021, more than a century following the company’s inception, came a condition that now sits in paragraph 43 of the RBI’s Governance Directions: “An NBFC-UL shall be mandatorily listed within three years of its identification by RBI in the Upper Layer.” This rule now seeks to decide the ownership of a time-tested legacy, akin to a new toll on an old road that was exempt from levies all along.The test that movedTata Sons has no depositors and no policyholders. On top of it, in line with its highly efficient and ethical practices, it repaid a whopping Rs 21,000 crore and became debt-free. In March 2024, it applied to surrender its registration, relying on the RBI’s own rule that a CIC not accessing public funds need not register.Also read: Why Should the Tata Rebels Back Down?What did the RBI do? It sat on that application for two and a half years and even moved goalposts towards the fag end of this time frame, before finally rejecting Tata Sons’ application. In June 2026, it redrew the ‘Upper Layer’ to include any NBFC with assets of Rs 1 lakh crore or more. With effect from the very next month, it stretched the very definition of “public funds” to bring into its purview money received indirectly, “through associates and Group entities”.A rule for everyone except the stateFurther, RBI’s twice-changed rules have been unevenly imposed on Tata Sons. The June 2026 proviso to paragraph 43 exempts NBFCs “fully owned and controlled by the Government”, which means the rule binds every kind of owner except the state. Among the 17 NBFCs in the Upper Layer, only Tata Sons is unlisted.What the law asks of the RBIWhat the law asks of the RBI points to a different terrain of books. None of it concerns ownership. Section 45JA of the RBI Act, 1934 allows it to issue directions on income recognition, accounting standards, provisioning, capital adequacy and deployment of funds. Section 45L(3) requires it to have due regard to “the conditions in which, and the objects for which, the institution has been established.”Also read: Tata Group and Tata Trusts Continue Sparring, ‘Listing Not Mandatory’, Say Noel Tata and 3 TrusteesTata Sons’ vision, mission and values are crystal clear, and in fact a glittering case study in altruism. Sir Dorabji and Sir Ratan Tata left their shares to charity, and the trust dividends have all along been funding hospitals, research, and relief. A listing mandate does not merely ignore those objectives; it overrides them. Further, the Tata Sons’ group companies that do raise public money, TCS, Tata Steel, Tata Motors, Tata Power and Tata Capital, are already listed and duly covered under the SEBI purview. Listing the holding company protects no new investor. It solely changes the owner, and needlessly so.A change of characterTata Sons never set out to be a finance company. It became a holding company only because its businesses grew and became separate companies. Right now, it is owned by charities. After listing, those charities would be a shareholder among strangers. Forcing a change in who owns a company is a serious step a regulator can take, which is why it should pass three tests: It should apply only where public money is involved, it should apply equally to everyone, and it should come with clear reasons and enough time. In the case of Tata Sons, the RBI has passed none of these.Ambiguity is no policyVague rules often thrive in bureaucratic setups, but they prove fatal for businesses. If a century-old, debt-free enterprise owned by charities cannot rely on RBI rules, one can imagine the formidable challenges facing international investors and our budding founders of startups spread across the length and breadth of the country.Nitin Potdar is a senior corporate and M&A lawyer.This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.