New Delhi, May 1 -- A clarification by the Reserve Bank of India has undercut Tata Sons' attempt to distance itself from public funds, potentially retaining it in the upper layer of non-bank financial companies (NBFCs), a category that entails tighter regulation and a mandatory listing requirement.

The move complicates matters for the holding company of the Tata group, which has been trying to stay private, especially since RBI introduced its scale-based supervision of non-bank lenders.

Late Wednesday, the central bank said it has received feedback that the mention of 'indirect public funds' in its draft non-banking financial company (NBFC) circular of 6 February leads to treating equity investment in an NBFC by group entities having de...