The Reserve Bank of India  on Saturday announced a slight easing of the rules under which foreign funds and expatriates are required to seek permission to invest in domestic companies.

The RBI said these investors would now need permission to invest further when their acquisitions brought the overall foreign investment in a company within 0.5 percentage points of the limit for such holdings.

This compares with the earlier threshold of 2 percentage points.

This means that if the aggregate foreign fund investments reach 19.5 per cent in a state-run bank, where the foreign limit is 20 per cent, no further foreign investor purchases will be allowed without the central bank's permission.

Under the previous rules the central bank's approval would have been required when the aggregate holdings reached 18 per cent.

India limits foreign portfolio investments in companies with sectoral caps which range from 20 per cent to 74 per cent.

The new rule applies to shares of companies having an equity base of Rs 1,000 crore (Rs 10 billion) or more.

The Reserve Bank of India said the move aimed to increase the floating stock of shares of these companies and improve the price discovery process.