Foreign direct investment has become an important channel through which capital, technology, managerial practices, and international financial expertise enter emerging economies. In banking, however, foreign participation has consequences beyond the interests of individual investors because banks are closely connected to monetary transmission, credit allocation, payment systems, and financial stability. This article examines India’s framework for foreign direct investment in banking with particular attention to the Foreign Exchange Management Act, 1999 [17] (FEMA), the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 [3], Reserve Bank of India directions, and the Government of India’s foreign direct investment policy. The study adopts a doctrinal and policy-oriented approach based on statutes, regulatory instruments, official reports, policy documents, and relevant academic literature. It evaluates the rationale for foreign participation, the distinction between private- and public-sector banking, entry routes, institutional responsibilities, compliance requirements, and the principal risks associated with cross-border ownership. The analysis suggests that India has pursued calibrated liberalization rather than unrestricted openness. The framework permits meaningful foreign participation while retaining prudential safeguards and governmental oversight. At the same time, overlapping regulatory responsibilities, evolving policy requirements, and compliance costs can affect predictability for investors. The article argues that the next stage of reform should concentrate on regulatory coordination, stable interpretation, digital compliance, transparent approval procedures, and continued protection of financial stability.