North Block has now asked the RBI to re-visit its earlier suggestion on the proposed cap.
"North Block has not yet finalised the limit. We will do that only after receiving inputs from the Securities and Exchange Board of India and the RBI by September 22 on what the cap should be," a finance ministry official said.
Apparently, the original suggestion of the RBI does not fit into the current policy framework, which lays down four levels of FDI (26, 49, 74 and 100 per cent) in various sectors.
"The RBI's suggestion does not fall into any of these four levels. We have asked them to suggest a cap in any of the four categories," the official said.
A committee headed by Sebi's Wholetime Member G Anantharaman had recommended a 26 per cent cap on FDI in stock exchanges.
North Block will suggest the creation of a new category for FDI in "stock exchanges", which will include not just the Bombay Stock Exchange but all regional stock and commodity exchanges.
The government's present FDI policy for the financial sector does not mention stock exchanges, depositories and clearing corporations. They do not figure in the 19 permissible investments in the financial sector.
North Block officials pointed out that several countries followed different practices in allowing FDI in stock exchanges. For instance, Singapore allows 100 per cent FDI in stock exchanges.
On the other hand, while the UK also allows 100 per cent FDI, the law states that national regulations will reign supreme even if the London Stock Exchange is fully acquired by a foreign company or exchange.Of the two depositories in the country, National Securities Depository Ltd already has four foreign banks as shareholders.
