The union cabinet is likely to take a call on Wednesday on winding up of the 25-year-old Foreign Investment Promotion Board (FIPB), which currently vets FDI proposals requiring the government approval.
Finance Minister Arun Jaitley in his Budget on February 1 announced scrapping of the inter-ministerial body, which comes under the finance ministry's Department of Economic Affairs.
A suitable mechanism may also be proposed by the Cabinet on Wednesday to deal with foreign direct investment in sensitive sectors, sources said.
Last week, Commerce and Industry Minister Nirmala Sitharaman had said a decision has taken for closure of the FIPB.
"Necessary arrangements will have to be made on which discussions have happened among several ministries... The Cabinet has to take a call on it," she had said.
The FIPB was initially constituted under the Prime Minister's Office in the wake of economic liberalisation in the early 1990s.
Sectors that are under the approval route for FDI includes defence and retail trading. According to the proposed mechanism, respective ministries would take care of the FDI proposals going forward.
Several experts have opined in the past that the need to get FIPB approval often leads to delays in foreign investments coming in.