India today announced a dramatic overhaul of its security and intelligence agencies, as Delhi scored a diplomatic victory by convincing the UN to ban a Pakistani charity because it was a "terrorist outfit" and a front for a radical armed group behind the Mumbai terror attacks that left 171 dead.

In a bid to assuage public anger over the ease with which 10 gunmen and bombers had been able to hold hostage a portion of south Mumbai for almost three days, ministers admitted "failures had occurred" and said the government would create a FBI-style national investigative agency, beef up coastal security and strengthen anti-terror laws. It also emerged that the UN's security council designated four members of Lashkar e-Taiba (LeT) as terrorists – the militant Islamist group which India said masterminded last month's deadly attacks in Mumbai. The "terrorist" quartet comprises the group leader, Hafeez Muhammad Saeed, the chief of operations, Zakir Rehman Lakhvi, the finance chief, Haji Muhammad Ashraf, and financier Mahmoud Mohammad Ahmed Bahaziq. Lakhvi was arrested by Pakistani authorities on Sunday, after police in Mumbai said he was instrumental in planning the bloody terror strike last month. At the prompting of India and the US, the committee also declared Jamaat-ud-Dawa, which runs out of a sprawling complex near Lahore, a terrorist group subject to UN sanctions, including an asset freeze, travel ban and arms embargo. China had previously vetoed attempts to ban Jamaat, which helped victims of the 2005 Kashmir earthquake, on three occasions. Last week, the US national intelligence director, Mike McConnell, named Lashkar as the likely perpetrator of the Mumbai attacks. Jamaat is considered a front for Lashkar, which was formally banned in Pakistan in 2002. Although Lashkar began as a guerrilla group fighting Indian troops in Kashmir, analysts say in recent years the Islamist outfit has become more ambitious. The group was blamed for killing 200 people in a series of coordinated bomb blasts on the Mumabi rail network in 2006. Hafeez Muhammad Saeed, who now leads Jamaat and founded Lashkar in 1989, told reporters the UN move was an attempt to target religious bodies. Saeed said his group would fight the decision in Pakistani and international courts. He challenged Indian and US officials to produce evidence against Jamaat. "We are ready to face any court," he was reported as saying. In Delhi, India's foreign minister, Pranab Mukherjee, said that Saeed had been operating in plain sight and was "on television screens" in Pakistan. He urged Pakistan to take "positive steps" to "dismantle terrorist infrastructure". The minister said that attacking Pakistan was "not a solution".

"We have given them a list of 40 persons (to return to India) … What we are telling the government of Pakistan is to act. Mere expression of intent is not enough."

The foreign minister rebutted suggestions from the Pakistani president, Asif Ali Zardari, that the terror strikes on Mumbai was the handiwork of "non-state actors". "Are non-state actors coming from heaven? Did they come from another planet? Non-state actors were operating from the territory of a country," Mukherjee said, without naming Pakistan. In Mumbai, a magistrate granted police permission to hold the only surviving Mumbai attacker, Mohammed Ajmal Kasab, for another two weeks. A tight security cordon has been thrown around the downtown Mumbai building where Kasab is being held, with officials saying they fear an attempt by militants to rescue the prized prisoner. Over the past few days it has become clear that many signs were missed by local Indian police forces who picked up terror suspects with maps of Mumbai, but did not "join the dots". There are also concerns that the militants' use of satellite phones, global positioning systems and internet telephony has outstripped the Indian police's ability to track them. A court in Mumbai is considering a petition to ban Google Earth, after reports suggested the attackers used it to plot the assault. "Given the nature of the threat, we can't go back to business as usual," the new Indian home minister, Palaniappan Chidambaram, said in a speech to parliament. He said the government would "take certain hard decisions to prepare the country and people to face the challenge of terrorism".