The government has cleared the setting up of a commission that will examine the sub-categorisation of Other Backward (OBC) in the central list.
The decision has been taken to ensure that benefits reach all backward castes, Arun Jaitley said while briefing reporters on cabinet's decisions.
In another decision, the union cabinet also increased the creamy layer ceiling on jobs reserved for OBCs.
The ceiling has been hiked to Rs 8 lakh per annum from the existing Rs 6 lakh for central government jobs.
Several BJP leaders welcomed the government's decision saying it was a long pending demand of the OBC community.
"It is an unparallelled step towards empowering backward classes. The average income among them had risen with time and there was an increasing demand to raise the creamy layer bar. The decision will provide reservation benefits to many more people," BJP general secretary Bhupender Yadav said.
The move will benefit BJP politically as it seeks to expand its presence among the backward classes.