Groups with diversified financial and industrial interests are increasingly redesigning their balance sheets to avoid falling within the Reserve Bank of India's regulatory definitions, sources said, underscoring how compliance costs and supervisory scrutiny are shaping corporate finance strategy in India.
The moves are centred on two structures that have long sat at the intersection of finance and industry: non-banking financial companies, or NBFCs, and core investment companies, or CICs. According to people familiar with the developments, some groups are boosting non-financial income at NBFCs, while others are reshaping the asset composition of CICs so they do not trigger thresholds that would require registration with the central bank or bring them under a tighter compliance regime.
Regulatory Thresholds
The strategy reflects a careful reading of RBI rules that determine when a company is treated as a regulated financial entity. NBFCs are subject to registration, capital adequacy, governance and reporting requirements once they meet the relevant criteria, while CICs face separate conditions tied to their asset mix and investment profile. By adjusting the composition of income or assets, some groups are seeking to remain just outside those definitions rather than accept the burden of full regulatory oversight.
Sources said the changes are not necessarily aimed at disguising financial activity, but at preserving flexibility in how group entities are classified. In practice, however, the line between legitimate restructuring and regulatory arbitrage can be thin. The RBI has in recent years sharpened its focus on shadow banking, group leverage and interconnected exposures, especially after episodes of stress in parts of the non-bank financial sector.
The latest manoeuvres also highlight a longstanding tension in India's financial architecture. Large conglomerates often use holding companies and finance arms to channel capital, support operating businesses and manage treasury functions. But once those entities begin to resemble financial intermediaries in scale or function, they can attract regulatory attention. That is prompting some groups to alter the balance sheet profile of those entities before they cross the line.
Income And Asset Shifts
At the NBFC level, the reported emphasis on non-financial income suggests a deliberate effort to change the revenue mix. Such income can include fees, commissions, advisory earnings or other operating revenues that reduce the relative weight of interest income and lending activity. For regulators, the concern is not merely accounting presentation but whether the entity's core business remains financial in substance.
For CICs, the issue is the asset side. These companies are typically designed to hold investments in group entities, but if the composition of assets shifts too far from the prescribed structure, or if financial assets dominate in a way that brings the company within the RBI's ambit, registration and supervision may follow. Sources said some groups are therefore rebalancing holdings to keep the entity within the intended category.
The trend comes at a time when Indian regulators are increasingly attentive to group structures that can obscure leverage or create hidden channels of risk. Holding companies, in particular, can sit above operating businesses while also owning finance subsidiaries, making it difficult to assess consolidated exposure without detailed scrutiny. That has made them a natural focus for supervisory review.
Wider Compliance Pressure
For corporate groups, staying outside the RBI's regulatory perimeter can mean lower compliance costs, fewer reporting obligations and greater freedom in capital allocation. But it can also invite questions about whether the structure is being used to avoid oversight rather than to reflect genuine business needs.
Market participants said the RBI's stance on such structures is likely to remain firm, especially as it continues to emphasise transparency, governance and the containment of systemic risk. Any sustained attempt to engineer balance sheets around regulatory definitions could prompt closer examination of substance over form, particularly where entities are economically engaged in financial activity.
The development also arrives against the backdrop of a broader debate over the role of non-bank finance in India. NBFCs have become important lenders to segments underserved by banks, but the sector has also been vulnerable to liquidity shocks and governance lapses. That history has made regulators wary of complex group arrangements that may amplify risk outside the formal banking system.
For now, the restructuring appears to be a pre-emptive response to that environment. But the underlying message is clear: as the RBI tightens its lens on financial conglomerates, some groups are trying to redraw the boundaries of regulation before the regulator does it for them.