The companies can keep the data as long as they want. Moreover, in this era of digital storage, the data can be literally stored and retrieved even after million years! So companies can keep our data even our grandchildren can say like 'Oh I'm excited to work in the comapny my grand pa worked
'
As far as background check is concerned, companies can go upto any extent to get information about you. No regulation in India exists about this, so better be honest. If you are honest and nothing to hide, let companies do check anything about you.
Good luck!
Sai Surya, SCJP 5.0, SCWCD 5.0, IBM 833 834
http://sai-surya-talk.blogspot.com, I believe in Murphy's law.