New Delhi, Nov. 4: The government is holding talks with the Reserve Bank of India to ease the foreign direct investment norms for banks with over 50 per cent foreign ownership but run by Indians such as ICICI Bank and HDFC Bank.

“One limited area is under discussion — that is the banking sector. We are holding discussions with the RBI,” Ajay Shankar, secretary in the department of industrial policy and promotion said at a conference of economic editors.

The FDI norms released in February had resulted in seven Indian banks being labelled as foreign-owned and India-controlled, severely restricting their existing downstream investments in sectors such as insurance.

The DIPP, the nodal agency for FDI policies, is expected to announce the relaxations soon. After this, downstream investments of ICICI Bank and HDFC Bank in their insurance companies will not be counted as FDI.

According to the norms issued in February this year through press notes 2, 3 and 4, both ownership and control of banks should be in Indian hands for them to qualify as domestic entities.

“(In) some of our very large banks, control is in Indian hands, but technically ownership of more than 51 per cent is not in Indian hands,” Shankar said.

The central bank is against these norms as they will change the character of many Indian banks to foreign banks.

Moreover, downstream investments of these banks will also be counted as FDI, barring them from investing in sectors that have caps.