The decision regarding this was taken at a Cabinet meeting chaired by Prime Minister Narendra Modi.
"The Cabinet has given its approval for raising foreign shareholding limit from 5 per cent to 15 per cent in Indian stock exchanges," an official spokesperson said in a tweet.
The Cabinet has also cleared the proposal to allow foreign portfolio investors to acquire shares through initial allotment in stock exchanges.
The decision is aimed at attracting more foreign inflows in stock exchanges like BSE and the National Stock Exchange.
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The approval is a follow-up to the announcement made by Finance Minister Arun Jaitley in his 2016 Budget speech.
"The Union Cabinet has given its approval for raising
foreign shareholding limit from 5 per cent to 15 per cent in Indian Stock Exchanges for a stock exchange, depository, banking company, an insurance company and a commodity derivative exchange," an official statement said.
"The move will help in enhancing global competitiveness of Indian stock exchanges by accelerating/facilitating the adoption of the latest technology and global best practices, which will lead to overall growth and development of the Indian capital market," it said.