At a joint press conference with visiting British chancellor of exchequer Gordon Brown, Chidambaram cited the example of Standard Chartered Bank of UK, which is the largest foreign bank in India, and said the bank can further expand its business organically.

"We hope the UK will give some more branch licences to Indian banks," the minister said.

Brown and Chidambaram met on Thursday in New Delhi at the first official level meeting of the India-UK Economic and Financial Dialogue.

Brown, who is on a three-day visit to India, his first-ever to the country, said he had been assured of a level playing field to companies in the race for acquiring Indian mobile phone operator Hutchison Essar.

Responding to a question on Vodafone's bid for the company, Brown said: "We have been assured there is a level playing field."

Brown, who is widely seen as Britian's Prime Minister in waiting, said that Chidambaram had indicated to him that India would introduce a Bill in the forthcoming session of Parliament next month that seeks to increase the limit on foreign direct investment in insurance companies from 26 per cent to 49 per cent.

The Bill also seeks to allow companies with unique structures like Lloyds of London to undertake reinsurance in India.

Both countries have agreed to explore opportunities through public private partnerships in sectors such as health and education, besides enhancing cooperation in the banking, financial, infrastructure and information technology sectors.

While the UK is India's fourth largest trading partner and the fifth largest source of foreign investment, India has emerged as the second largest investor in the UK in terms of number of projects.

In fact, foreign direct investment outflows from India to the UK have exceeded those from the UK into India since 2004.

"We feel the time is ripe to expand collaboration in knowledge-based industry and to stimulate greater investments in India by both large co-operations and small and medium enterprises," Chidambaram said.

FDI in the retail sector too figured in the discussions with Indian government officials. Both sides also discussed ways to stem the flow of funds to terrorists. Britain assumes the Presidency of the Financial Action Task Force this year.

"I am pleased to confirm that India will attend the Task Force, starting with the International Plenary next month," Brown said.