Examine the systemic risks posed by large Core Investment Companies and evaluate whether mandatory listing is an adequate regulatory response.

Core Investment Companies (CICs) are NBFCs that mainly hold equity in group companies. RBI's Scale Based Regulation (SBR), October 2021 places the largest of them in the Upper Layer (NBFC-UL), which must list within three years of identification [1]. RBI's August 2026 UL list, naming Tata Sons Private Ltd. as a CIC [3], makes this debate immediate: listing is necessary, but not by itself sufficient.

Systemic risks posed by large CICs

• Opacity through layering: multiple CICs within one group obscure true consolidated exposure; RBI therefore capped CIC layers at two and mandated consolidated financial statements [2].
• Double leverage: debt raised at the holding level is downstreamed as equity into subsidiaries, inflating effective group leverage — RBI now deducts cross-CIC capital contributions above 10% [2].
• Contagion and interconnectedness: RBI's Financial Stability Reports repeatedly flag deepening bank–NBFI linkages [4]; the IL&FS collapse (2018) showed how a group holding structure transmits stress to banks and mutual funds.
• Governance concentration: closely-held, promoter- or trust-dominated boards prompted RBI to require a Group Risk Management Committee and a Chief Risk Officer for large CICs [2].

Is mandatory listing adequate?

• Merits: continuous SEBI-mandated disclosure, quarterly reporting and analyst scrutiny replace opacity with market discipline; equity access reduces debt dependence; RBI's refusal of Tata Sons' de-registration plea signals rule-based rather than discretionary regulation [5].
• Limits: listing addresses transparency, not prudence — it neither caps leverage nor ensures liquidity. Markets misprice risk, and several listed NBFCs still failed post-2018. Dilution also clashes with trust-based ownership, creating incentives to restructure below thresholds.

Mandatory listing is thus a valuable but partial instrument: it strengthens disclosure while leaving prudential and resolution gaps untouched. The way forward lies in pairing it with consolidated group-level supervision under SBR [1], stronger group risk governance [2], and inter-regulatory coordination through the FSDC — ensuring that entities of systemic significance carry regulation proportionate to their footprint, the core promise of scale-based regulation.