In terms of the Press Note No.2 (2004 Series) issued by the Ministry of Commerce and Industry on March 5, 2004, the FDI limit in private sector banks was raised to 74% under the automatic route, including the investment made by FIIs. Foreign banks, according to the Press Note, will be permitted to have either branches or subsidiaries, not both.
They may operate in India through only one of the three channels viz., (i) branch/es; (ii) a wholly owned subsidiary; or (iii) a subsidiary; with aggregate foreign investment up to a maximum of 74% in a private bank. The Press Note mentioned that the guidelines in this regard will be issued by the Reserve Bank of India.