The policy changes that would allow some private sector banks to be out of the new FDI guidelines may require the approval of Cabinet.

At the same time both RBI and the finance ministry has been approached to review the new FDI norms that may change the ownership of most Indian banks.

The largest private lender, ICICI Bank has also sent a letter to the Department of Industrial Policy and Promotion (DIPP) seeking for a review in the new FDI norms. A senior official informed that the request for a clarification has been circulated to the Financial Services Department and the RBI.

Further he said that the matter may go back to the Cabinet if the new FDI guidelines would require some ‘material' amendments. "The Cabinet approval would be required for amendments since the February guidelines were approved by the Cabinet," said the official said.

However if the DIPP or the Financial Services Department gives clarification on the issue then the Cabinet's approval would not be required.

As per the new FDI norms, several banks including ICICI Bank and HDFC Bank would find their ownership changed. The FDI norms state that if there is more than 50% indirect FDI in an Indian company, its investment in the subsidiaries will be considered as foreign investment. As a result of this the ownership status would change in most of the banks.