Schedule I explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Table in Schedule I to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 ends with a block headed "F Financial Services". Its first three entries cover asset reconstruction companies, private sector banks and public sector banks. Private banks carry the longest set of conditions: resident holding, NRI limits, the insurance cross-check and the rules for subsidiaries of foreign banks. The Rules are made under clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999.
This article states the position as per the Rules notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. Later amendments, press notes and sector regulators' conditions should be checked before acting. For a stake in a bank or a financial company, see our FEMA advisory service.
Asset reconstruction companies: hundred per cent, automatic route. Private sector banks: 74%, automatic up to 49%, Government route beyond 49% and up to 74%; at least 26 percent of paid up capital must be held by residents at all times, except for a wholly-owned subsidiary of a foreign bank. Public sector banks: 20%, Government route, and that ceiling also applies to the State Bank of India. Financial services not listed under F need prior Government approval.
The heading of the financial services block
Under "F Financial Services" the Table prints: investment in financial services, other than those indicated below, would require prior Government approval. This repeats the proviso to paragraph 3(b)(iii) of Schedule I, which otherwise opens unlisted sectors up to one hundred percent on the automatic route. So for financial services the default is reversed: an activity not found under F is on the Government route. See sectoral caps, investing companies and joint audit.
The entries after the amendment
| Serial number | Sector or activity | Sectoral cap | Entry route |
|---|---|---|---|
| F | Financial Services (heading and opening line) | - | - |
| F.1 | Asset Reconstruction Companies | Hundred per cent | Automatic |
| F.1.1 | Other conditions (a) to (c) | - | - |
| F.2 | Banking - Private sector | 74% | Automatic up to 49%; Government route beyond 49% and up to 74% |
| F.2.1 | Other conditions (a) to (i) | - | - |
| F.3 | Banking - Public Sector (heading) | - | - |
| F.3.1 | Banking - Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts, 1970/80. This ceiling is also applicable to the State Bank of India | 20% | Government |
The Table prints the hundred per cent cap as a percentage figure; it is written in words throughout this article.
Which notification changed what
| Provision | Change | Notification |
|---|---|---|
| F.2.1(c) | Substituted: the fixed insurance percentage gave way to "the limit of foreign investment applicable for the insurance sector as specified in serial number F. 8.1 and F. 8.2" | Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021, S.O. 3411(E) dated 19 August 2021, clause 2, item (i) |
| F heading, F.1, F.1.1, F.2 (cap and route), F.2.1 other clauses, F.3, F.3.1 | As notified on 17 October 2019 | None of the 19 amending notifications up to 2 September 2026 changes them |
Serial number F.1.1: asset reconstruction companies
(a) The investment limit of a sponsor in the shareholding of an ARC is governed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; investment by institutional or non-institutional investors is also governed by that Act.
(b) FPIs can invest in the Security Receipts (SRs) issued by ARCs, and may be allowed to invest up to hundred per cent of each tranche in SRs, subject to directions or guidelines of the Reserve Bank. Such investment shall be within the relevant regulatory cap as applicable.
(c) All investments are subject to the provisions of that Act.
Serial number F.2.1: private sector banks
(a) Resident holding. At all times, at least 26 percent of the paid up capital shall have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank.
(b) NRIs. Individual NRI holding is restricted to 5 percent of the total paid up capital, and the aggregate limit cannot exceed 10 percent, both on repatriation and non-repatriation basis. NRI holdings can be allowed up to 24 percent of the total paid up capital, on both bases, subject to a special resolution to this effect passed by the banking company's general body.
(c) Banks with an insurance arm. Applications for foreign direct investment in private banks having a joint venture or subsidiary in the insurance sector may be addressed to the Reserve Bank for consideration in consultation with the Insurance Regulatory and Development Authority of India, to ensure that the limit of foreign investment applicable for the insurance sector as specified in serial number F.8.1 and F.8.2 is not breached.
(d) Transfers. Transfer of shares under FDI from residents to non-residents requires approval of the Reserve Bank and/or the Government, wherever applicable.
(e) Other regulators. The policies and procedures prescribed by the Reserve Bank and other institutions such as the Securities and Exchange Board of India, the Ministry of Corporate Affairs and IRDAI on these matters apply.
(f) Five percent acquisitions. Reserve Bank guidelines on acquisition of capital instruments of a private bank, where the acquisition results in any person owning or controlling 5 percent or more of the paid up capital, apply to foreign investment as well.
(g) Subsidiaries of foreign banks.
- (i) Foreign banks are permitted to have either branches or subsidiaries, but not both.
- (ii) Foreign banks regulated by a banking supervisory authority in the home country and meeting the Reserve Bank's licensing criteria are allowed to hold hundred per cent paid-up capital to set up a wholly-owned subsidiary in India.
- (iii) A foreign bank may operate in India through only one of three channels: branches; a wholly-owned subsidiary; or a subsidiary with aggregate foreign investment up to a maximum of 74 percent in a private bank.
- (iv) A wholly-owned subsidiary may be established through conversion of existing branches or through a new banking licence. A subsidiary may be established through acquisition of shares of an existing private sector bank, provided at least 26 percent of its paid-up capital is held by residents at all times.
- (v) A subsidiary of a foreign bank is subject to licensing requirements and conditions broadly consistent with those for new private sector banks.
- (vi) Guidelines for setting up a wholly-owned subsidiary of a foreign bank shall be issued separately by the Reserve Bank.
- (vii) All applications by a foreign bank for setting up a subsidiary, or for conversion of existing branches to a subsidiary, are made to the Reserve Bank.
(h) Voting rights. The present limit of 10 percent on voting rights in respect of banking companies may be noted by the potential investor.
(i) Banking law. All investments are subject to the guidelines prescribed for the banking sector under the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934.
Two cross-references to confirm
- Condition (c) points to "serial number F.8.1 and F.8.2". The insurance entry was substituted as a whole by S.O. 2186(E) dated 2 May 2026: F.8.1 is now the insurance company, F.8.2 the Life Insurance Corporation of India and F.8.3 the insurance intermediaries. Condition (c) was not re-worded. See insurance companies, intermediaries and LIC.
- Condition (g)(iv) says the 26 percent resident holding is "consistent with para (c) above", while that requirement is printed in clause (a).
Both are quoted as printed; readers should confirm against the official text.
Serial number F.3: public sector banks
One entry, F.3.1: banking in the public sector, subject to the Banking Companies (Acquisition & Transfer of Undertakings) Acts, 1970/80, with a cap of 20% under the Government route. The entry adds that this ceiling is also applicable to the State Bank of India. No "Other conditions" are printed under it.
A worked example
Wexford Financial Holdings Limited, a foreign company that is not a bank, wants 60% of Sarayu Bank Limited, a private sector bank. The cap is 74%. Up to 49% the route is automatic; the part beyond 49% needs Government approval. After the deal, residents must still hold at least 26 percent. Because Wexford would own more than 5 percent, the Reserve Bank's guidelines on such acquisitions apply (condition (f)), and Wexford should note the 10 percent limit on voting rights (condition (h)). Sarayu has an insurance subsidiary, so the application may go to the Reserve Bank for consideration in consultation with IRDAI under condition (c).
An NRI, Mr Dev Arora, holds 4 percent of Sarayu. That is within the 5 percent individual limit; all NRIs together may not exceed 10 percent unless the general body passes a special resolution, which can take the ceiling to 24 percent.
Wexford also looks at 15% of a public sector bank. Serial number F.3.1 caps foreign investment at 20% and puts it on the Government route.
Need help with foreign investment in a bank or ARC?
The FEMA cap is only one of several limits; the banking statutes and the Reserve Bank's own approvals sit beside it. Our FEMA advisory team maps the Schedule I conditions for you and works with your banking counsel on the rest.
Key takeaways
- Financial services not listed under F need prior Government approval.
- ARCs: hundred per cent, automatic route, subject to the 2002 Act.
- Private sector banks: 74%; automatic up to 49%, Government route beyond 49% and up to 74%.
- Residents must hold at least 26 percent of a private bank, except a wholly-owned subsidiary of a foreign bank.
- NRI limits in private banks: 5 percent individual, 10 percent aggregate, up to 24 percent with a special resolution.
- Public sector banks and the State Bank of India: 20%, Government route.
Read next
- Serial number F.8 of the Table: insurance companies, intermediaries and LIC
- Serial numbers F.4 to F.7 of the Table: stock exchanges, power exchanges and credit information companies
- Schedule I paragraph 3(a): automatic route and Government route
- Asset reconstruction companies: the SARFAESI Act and Reserve Bank registration
Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.