According to the ministry, the funding of the acquisition of Indian companies by multinationals needs to be within the framework of the national polcy and commercial considerations. In the wake of liberalisation and globalisation, given the national policy on foreign investment, such acquisition of Indian companies is likely to occur in the years to come, a ministry note said.

RBI governor Bimal Jalan has said that the issue of allowing the domestic FIs to fund a multinational takeover of a domestic company is a tricky one. It is tricky in the sense that in the present environment, Indian firms are raising money abroad in the foreign market and buying companies abroad, like the whole range of the IT sector, Mr Jalan said.

``We have to bear in mind that it is not a one way traffic anymore as in the eighties or nineties where we were only the recipients of the multinationals. It is expected that in ten years time, many of our companies would become dominant internationally, particularly in the IT sector.

Allaying the apprehension in certain quaters on the likely shortage of funds for India industries due to FIs funding MNCs for acquiring Indian comapnies, Mr Jalan said, ``I do not think that the issue, in terms of the aggregate availability of money is a problem for the Indian sector. If that problem ever arises, RBI can tackle it,'' he said.

If it is found that multinationals are coming in India, which is inhibiting Indian enterprise or the Indian industry from the market, therefore the RBI should take steps and provide remedies, he suggested.

``But, I do not think that it will happen or it can happen or it is likely to happen because I believe that given a comprative environment, Indian industry is more competitive than many of the international brands which are available in India,'' he explained.

However, he has suggested that the government should be cautious about this issue. In the present stage of development, there is no problem. This is because the RBI does not direct the government so far as the lending policy of the public financial institutions is concerned.

``But, personally I have sympathy with what is said in regard to the Indian economy being taken over with Indian funds by the companies with very small amount of capital,'' Mr Jalan noted. Currently, the Industrial Development Bank of India's policy is that if any acquisition is to be made by a foreign party, no money would be given by the institution for the purpose of acquiring an Indian asset. But, if the party wants to set up greenfield project or wants to to take up expansionm of any project, money would be provided for creation of that new asset.