A magistrate court in Dominica on Thursday sent businessman Mehul Choksi to a state prison, his lawyer in India said, but added that he would continue to remain in hospital as his medical condition "deteriorated".
The diamond trader was earlier in police custody.
"Yes, police custody has been changed to prison custody but he shall remain in hospital as his medical condition has deteriorated," lawyer Vijay Aggarwal said.
The development is being seen as a ray of hope for India which has approached the Dominica high court seeking to be impleaded as a party in the case filed by lawyers of Choksi whose bail plea was earlier rejected.
Choksi is wanted in India in a case of loan fraud worth about Rs 13,500 crore in the state-run Punjab National Bank.