Groups with financial arms are increasingly reclassifying assets and income streams in an effort to stay beyond the Reserve Bank of India's regulatory thresholds, people familiar with the developments said. The trend reflects a broader attempt by conglomerates to preserve flexibility while avoiding the tighter registration, reporting and governance requirements that come with being formally recognised as a regulated non-banking financial company or core investment company.
Regulatory Threshold Play
At the centre of the restructuring is a careful calibration of balance-sheet composition. Under India's regulatory framework, whether an entity is treated as an NBFC or a core investment company depends on the nature of its assets and income. Sources said several groups are now actively managing those ratios, shifting toward non-financial income in the case of NBFCs and adjusting asset mixes in the case of holding companies and CICs.
The objective is not necessarily to exit financial activity altogether, but to remain just outside the definitions that trigger mandatory registration with the RBI. That distinction matters because registration brings with it prudential norms, capital adequacy expectations, governance standards, disclosure obligations and periodic scrutiny. For groups that have historically used holding companies to house strategic investments in financial and operating businesses, the regulatory burden can be significant.
The practice has gained attention because it sits in a grey zone between legitimate corporate structuring and regulatory arbitrage. While companies are entitled to organise their affairs within the law, the RBI has long been wary of structures that appear designed to evade oversight while continuing to perform financial intermediation or investment functions.
Income And Asset Shifts
According to sources, some NBFCs are increasing the share of non-financial income on their books, a move that can alter the classification calculus if financial income no longer dominates. Others are changing the composition of assets held by holding companies and CICs so that they do not breach the thresholds that would bring them under the RBI's direct supervisory ambit.
In practical terms, this can involve moving away from financial assets, reducing exposure to group investments that count toward regulatory tests, or rebalancing portfolios in ways that change the entity's profile at the reporting date. Such steps may be technically permissible, but they raise questions about substance over form, especially if the underlying economic activity remains unchanged.
Industry executives and compliance professionals say the incentive to stay outside the RBI framework is strong. Once an entity crosses into regulated territory, it must meet continuing obligations that can affect leverage, funding structures, related-party transactions and group-wide capital allocation. For conglomerates with multiple subsidiaries and layered ownership structures, those requirements can constrain internal flexibility.
The issue is particularly sensitive in India's financial sector, where the RBI has spent years tightening oversight of shadow banking, group structures and interconnected exposures. The central bank has repeatedly emphasised the need to identify entities that perform financial functions even if they are not structured like traditional lenders.
Oversight And Scrutiny
The latest restructuring trend underscores a familiar tension in Indian financial regulation: the gap between legal form and economic function. Regulators typically assess whether an entity's primary business is financial in nature, but large corporate groups can often adapt their books faster than rules are rewritten. That creates a moving target for supervisors.
Sources indicated that the RBI is aware of such balance-sheet management practices and may continue to examine whether entities are using accounting and structural changes to avoid registration without materially changing their business model. Any future tightening could focus on substance-based tests, group-level exposures or more granular income and asset classification rules.
For now, the trend highlights how regulatory definitions themselves can shape corporate behaviour. In a sector where compliance costs are rising and scrutiny is intensifying, staying outside the perimeter can be as strategically important as expanding within it. The result is a quiet but consequential reshaping of balance sheets across parts of India's banking, fintech and insurance ecosystem, with implications for transparency, supervision and systemic risk.
The development also comes at a time when policymakers are pressing for cleaner disclosure and stronger governance across financial conglomerates. If the practice widens, it could prompt a fresh debate over whether current thresholds are sufficiently robust to capture entities that function like financial institutions even when they are not labelled as such.