Over the last few years, India Inc. has been witnessing a steady increase in foreign investment from foreign portfolio investors (FPIs). In fact, in the month of July 2023 alone, FPIs had invested a sum of INR 47,977 crore in the Indian stock market - 97.2% of which was directed towards the equity market1. In the wake of the increasing inflow of foreign investment in India, there has been a constant inclination on part of the government to introduce a robust 'checks and balance' mechanism for investments undertaken by the FPIs.

To this end, the Securities and Exchange Board of India (SEBI) has last month issued a circular dated 27 July 2023 (Circular) which now requires all non-individual FPIs to use a legal entity identification number when investing into India.


LEI is a unique global reference identifier, consisting of a 20-character alphanumeric code, assigned for entities engaged in financial transactions. It identifies every distinct legal entity (operating globally in any jurisdiction) participating in any financial operation, thereby aiding the regulatory bodies in maintaining a track record of financial operations and ensuring stability in the ecosystem.

Reserve Bank of India (RBI) had implemented the requirement of the LEI regime in a phased manner in June 2017 and made it mandatory to obtain LEI for various participants in the financial market, following which various regulatory bodies have issued mandatory guidelines relating to the LEI disclosures. RBI directions mandate non-individual borrowers having an aggregate exposure of greater than INR 25 crores, to obtain the LEI code.

Prior to the release of the Circular, it was discretionary for an FPI to provide the LEI details in the common application form (CAF) while obtaining registration. However, post the issuance of the Circular, the voluntary disclosure requirement has been eliminated for all non-individual (existing and new) FPI investors.

Driving Force

Managing risk in a prudent manner and maintaining transparency and traceability in disclosure obligations are the key driving factors behind the introduction of the Circular by SEBI.

In addition to introducing transparency, the Circular provides tools to the regulators, to effective track the financial transactions globally and monitor exposure. With the access to the LEI code, the regulator can now extract details of all financial transactions which are conducted by an FPI and thereby allowing the regulator an opportunity to suo moto investigate and flag any fraudulent transactions in a timely manner.

Key Obligations

Pursuant to this Circular, (i) all FPIs are required to declare the LEI details while submitting a new application for fresh registration subsequent to the issuance of this Circular; (ii) all the existing FPIs including those applying for renewal that have not previously provided their LEI details shall submit these within a six-months' (180 days') time from the date of issuance of the Circular, failing which their account will be blocked for further purchases, until the LEI details are provided; and (iii) an FPI shall ensure that its LEI is active at all times. Accounts of FPIs whose LEI codes have expired or lapsed shall be blocked for further purchases in the securities market until the time the LEI codes are renewed by such FPIs. The designated depository participants are required to carry out the necessary modifications to the CAF in their portals.

Way Forward

This is a welcome move, geared to augment the risk management system, enhance transparency, quality, and accuracy of the financial data systems disclosure, and ensure sufficient controls and accountability in the financial markets. This Circular by enabling the identification and linking of the parties to the respective financial transactions, ensures effective monitoring and stability of the financial ecosystem.

However, the regulators would need to ensure that there are no delays with registration or renewal and the process is streamlined, enabling the FPI's to seamlessly invest in India, without any hindrance.


1.FPI Net Investment Details (Calendar Year) (

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