The Union cabinet today approved winding up of the 25-year-old Foreign Investment Promotion Board, which has been vetting Foreign Direct Investment proposals requiring government approval.

Finance Minister Arun Jaitley in his Budget speech on February 1 had announced the scrapping of the inter-ministerial body, which comes under the ministry's Department of Economic Affairs.

The decision to abolish FIPB was taken by the cabinet,chaired by Prime Minister Narendra Modi, Jaitley said while briefing the media after the meeting.

FIPB will be replaced by a new mechanism under which the proposals will be approved by the ministries concerned as per the standard operating procedure approved by the Cabinet, he added.

Jaitley further said that proposals in sensitive sectors will require the home ministry's approval.

On the proposals pending with FIPB, he said they will go back to the ministries concerned.

FIPB was constituted under the Prime Minister's Office following economic liberalisation in the early 1990s.

Currently, only 11 sectors, including defence and retail trading, require government approval for foreign direct investment (FDI).

Jaitley said that about 91-95 per cent of FDI proposals are under the automatic route.

There could also be a provision for quarterly review of pending proposals by the economic affairs secretary and annual review by the finance minister.

The FDI proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs.

Inflow of foreign direct investment into India increased by 9 per cent to $43.48 billion (Rs 2.82 lakh crore) in 2016-17.  -- PTI