The Centre has constituted a high-level committee to identify sectors where portfolio holdings of foreign institutional investors would be excluded from the foreign direct investment cap.

The committee, headed by Chief Economic Advisor Ashok Lahiri, will look at various sectors, including banking, where foreign investment including foreign institutional investors' holding is capped at 49 per cent.

In the last Budget, the government had announced that it would issue guidelines to allow FII portfolio investments beyond the permissible cap on foreign direct investment in specified sectors.

It had also allowed FIIs to invest through the portfolio investment route in companies beyond 24 per cent of their paid-up capital with the approval of the shareholders through a special resolution.

According to government officials, the banking sector had posed problems last year when the finance ministry blocked a proposal of Vysya Bank to raise the FII stake beyond the overall cap on foreign investment at 49 per cent.

In private banks, the FDI is capped at 49 per cent. The Reserve Bank of India guidelines on the issue allowed the total foreign investment to go up to 98 per cent, including 49 per cent for FII holding.

The finance ministry is also planning to introduce a Bill in the current session of Parliament to increase the FDI cap in the insurance sector from 26 per cent to 49 per cent.