RBI along with Finance Ministry, is a supervisory body that sees if in any way the banking company incorporated outside the country is discriminating against those which are incorporated in India. The apex banking body takes into account the factors like law of the country or the government under whose regime its incorporation has taken place.

However, any foreign bank whose policies and banking interests are in line with those established in India, automatically becomes an eligible candidate for carrying out expansion in the country.

The issue came into the light when Reserve Bank discussion paper addressing the issue of relaxation of branch licensing norms surfaced. The paper carried nothing substantial relating to the impartation of further space to foreign banks thus, triggering off the rumours that Central Bank isn't very much interested in giving the same to them.

For those who don't know India grants in a single class of banking license to foreign banks and does not ask them to switch-over from a lower category to a higher category of banking license over a time-period. The rule is more or less same in several other foreign countries.