ICICI Bank and HDFC Bank have recently been classified as foreign banks owing to the percentage of foreign stakeholding in these banks. But these banks have been kept at the same platform as nationalized banks as they are incorporated under Indian law, said DIPP Secretary R P Singh.

"In my view, neither ICICI nor HDFC Bank, even though their equity is owned by foreigners, suffers from any handicap, because they are incorporated in India. They are on the same footing as other nationalised banks and we have nothing to worry about it," Singh said.

He said that RBI makes no distinction between these banks and other nationalized banks.

"Banking is allowed via two ways -- either you open branches, in that case you don't technically bring FDI, or you incorporate a bank in India, take a license from RBI and than that particular bank gets equity from outside," he said elucidating his stand.

"But that bank we are calling foreign bank only for the purpose of downstream investment, otherwise it's an incorporated entity in India. It is on the same footing as other nationalised banks in terms of priority sector lending and branch expansion."

Singh added that these banks should not be in any dilemma while making downstream investments in sectors like insurance and NBFC sectors.

"Insurance has been kept out of new (FDI) rules that changed the status of ICICI Bank and HDFC Bank (to foreign owned and Indian controlled) and 100 per cent FDI is permitted in NBFC, so there should be no problem," Singh said.

The banks had been deep waters following the issue of their foreign holdings for quite some time.