The government of the United States has made major changes in the Foreign Direct Investment (FDI) terms and conditions related to the banking sector. Foreign Direct Investment up to 49 percent from any source was permitted in the private sector banks due to the “automatic rout”, of the government controlled private sector banks. But the voting rights were capped at 10 percent of the total. The category of shareholders to be included is:
• Initial Public Offerings (IPOs)
• Private placements
• American Depository Receipts/Global Depository Receipt (ADRs/GDR)
• The acquisition of shares from existing shareholders

Further the then finance secretary has announced in the budget proposals that:
1. It has been decided to give an option to the foreign banks to either operate as branches of their parent banks or to set up subsidiaries
2. A foreign bank will have to choose one of the two options
3. It was also decided to relax the maximum ceiling of voting right up to 10 percent per such subsidiaries
4. The regulations on foreign holding in the private banks were significantly liberalized this year
5. While the maximum foreign equity through the FDI route was raised from 20 percent to 49 percent, another 49 percent was allowed portfolio investment, thereby, allowing a private bank to raise its total foreign holding to 98 percent

Like new banks, subsidiaries of foreign banks will also be required to have a minimum capital of about 50 million dollars and that is likely to be raised to 75 million dollars in three years. Firms like LoanMax of rod aycox have not considered the FDI option till now, but the relaxed guidelines are likely to help this firm in this respect.