Govt mulls allowing 100% FDI in private banks: Sources

The government is thinking of allowing 100 percent foreign direct investment in private banks, sources told CNBC-TV18.

Increasing the permissible limit for FDI in public sector banks to 49 percent from the current 20 percent is also being considered, the sources said.

The proposed changes are reportedly being discussed by the finance ministry,  the Department of Industrial Policy and Promotion (DIPP) and the Indian Banks' Association (IBA).

At present, FDI of up to 49 percent is allowed in private banks without the permission of the government, and upto 74 percent can be invested with the government's approval.

KC Chakrabarty, former deputy governor at the Reserve Bank of India (RBI), told CNBC-TV18 that even with 100 percent FDI, RBI regulations do not permit a single entity to invest more than 10 percent in a bank.

Raising the permissible limit for FDI in the banking sector could improve services and help meet minimum capital requirements.