A senior finance ministry official said the central bank had discussed the issue with the ministry recently but no decision had been taken as yet.

The Reserve Bank of India's proposal would be placed before the new finance minister since the government had announced its intention to lift the cap on voting rights in the last year's Budget, he said.

The move to retain the voting rights together with the proposal to restrict foreign banks present in India from holding over a 10 per cent stake in a second bank in the country is expected to effectively close the doors for acquisitions by foreign banks in India.

The government had last year introduced a Bill in Parliament seeking amendments to the Banking Regulation Act to remove the 10 per cent cap on voting rights and bring it in line with the level of shareholding. The official said the central bank did not oppose the removal of the cap at that time.

The Bill was cleared by the parliamentary standing committee on finance but the government could not incorporate the recommendations because the Lok Sabha was dissolved.

Foreign banks have the option to enter the Indian market either as a branch or through a wholly-owned subsidiary. The other route is to acquire up to 74 per cent stake in a private sector bank.

The official said the Reserve Bank was of the opinion that foreign banks should be allowed to enter the country through the first two routes only.

If the government accepts the Reserve Bank of India's recommendations, it could affect the plans of a large number of foreign banks that intend to set up 100 per cent subsidiaries in the country or acquire controlling stakes in Indian banks.

"We will have to wait and see if the government accepts the RBI's recommendations and the extent to which it is actually implemented," said a senior executive with a foreign bank that is awaiting detailed guidelines for entering India through a subsidiary.