The Reserve Bank of India (RBI), which has taken up the matter with the country’s Finance Ministry, is expected to issue guidelines shortly after getting a go-ahead from the ministry, said sources.

The reason behind sending a draft of RBI’s discussion paper to the ministry was that licensing foreign banks is, besides regulatory, a bilateral issue.

RBI, for instance, granted additional branch permission for DBS Bank following the India-Singapore trade agreement that resulted in ICICI Bank and State Bank of India getting local bank status there.

India’s central bank, under the proposed regulations, might urge foreign banks to incorporate all their branches as their subsidiaries in India so that all of them are made to follow the rules governing capital adequacy ratio and sector-specific exposure limits, they added.

As per the FDI norms announced by the Indian government last year, ICICI Bank and HDFC Bank are considered “foreign-owned” despite being controlled by Indians and having their roots in the country.

At the time, the ICICI Bank chief executive Chanda Kochhar had said that they would continue to work as an Indian-managed bank and hoped that a clarification would emerge soon on the whole issue.

HDFC Bank chief Aditya Puri had also said that HDFC Bank would remain an Indian bank with majority of voting rights vested with Indians.

Finally, the new proposal, which is still under discussion, is expected to describe the Indian lenders such as ICICI Bank and HDFC Bank as “Indian-managed” banks despite them being foreign-owned in terms of their shareholding patterns.

In the 2005 road map, foreign banks were prescribed a capital requirement of $67.44 million for local incorporation and also allowed to operate as wholly-owned subsidiaries. However, none of them were willing to operate as a subsidiary since they didn’t see any advantages in doing so.

However, after global financial crisis, all large foreign banks that are present in India have said they would incorporate locally if they were forced to do so.

Experts believe it is due to the country’s strategic importance as one of the key emerging markets and increasing lending opportunities for banking sector in India.

Over 30 foreign banks in India, led by some of the biggest names — Citi, HSBC and Standard Chartered — operate through branches.

In a separate development, a survey revealed that about 25 percent of corporates in India are expecting 0.25 percent each hike in the mandatory cash reserves and the key policy rates by the RBI at its forthcoming policy review.

Majority of these corporates also supported the continuing appreciation of the Indian currency and hoped that the rupee to increase further in coming months and settle at around 44 to an American dollar, said a survey by RBS India.