I finally found the solution.
Entity beans 2.X are not supported in the lightweight configuration of JBoss AS 7 onwards. We have to use the use the standalone-full configuration or standalone-full-ha configuration for entity beans deployment in AS7.
Start the server using the standalone full.xml and and you'll see the entity beans being bound to JNDI:
17:27:31,762 INFO [org.jboss.as.ejb3.deployment.processors.EjbJndiBindingsDeploymentUnitProcessor] (MSC service
thread 1-7) JNDI bindings for session bean named XXXBean in deployment
unit subdeployment "XXXEJB.jar" of deployment "XXXEAR.ear" are as follows:
java:global/XXXEAR/XXXXEJB/<ejb bean name>!<package name><ejb local home>
java:app/XXXXEJB/<ejb bean name>!<package name><ejb local home>
java:module/<ejb bean name>!<package name><ejb local home>
java:global/XXXEAR/XXXXEJB/<ejb beanname>!<package name><ejb local>
java:app/XXXXEJB/<ejb bena name>!<package name><ejb local>
java:module/<ejb bean name>!<package name><ejb local>
The JNDI should be looked up by the java:global binding :
java:global/XXXEAR/XXXXEJB/<ejb beanname>!<package name><ejb local home>.
It works good..!!