FDI in Financial Services may be allowed under automatic route
Finance Ministry is in consultation with RBI to allow Foreign Direct Investment up to the sectoral cap in the segments of financial services under the automatic route. Further the norms governing the flow of foreign money into the financial services sector will also be eased. However under the present framework, FEMA regulations do not allow foreign transactions with players like Banks. A number of proposals for Foreign Direct Investment in Private Banks are already put on hold including the proposal of IFC to buy stake in Federal Bank. In order to streamline the foreign investment in financial services sector, the Government might have to amend FEMA accordingly to bring it in consonance with the proposed policy and guidelines for financial services sector.