Thanks Zero Grav i had found that list too. In a not very surprising twist, it turns out there is no list of banned/de-recognised foreign flight schools. When I asked Mr. Bhardwaj about it today he said he felt 'insulted'. And after that he refused to talk to me further, which in retrospect is oddly quite funny.
I don't know why he would feel insulted because its a straightforward question and its our right as Indian citizens to question how certain unfavourable decisions come about.
To me, it certainly seems that the DGCA refuses to accept certain schools, but the ideas behind that seems arbitrary.
Thanks for your help.