Skip to main content

What is Legal Entity Identifier (LEI)?

Quoting Legal Entity Identifier (LEI) code has become mandatory for various kinds of large value financial transactions. What is LEI?

What is Legal Entity Identifier (LEI)?

LEI is a 20-character unique identity code assigned to entities who are parties to a financial transaction.

Legal Entity Identifier (LEI) code has been conceived of as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. 

From where can LEI code be obtained?

Entities can obtain LEI from any of the Local Operating Units (LOUs) accredited by Global Legal Entity Identifier Foundation (GLEIF) – the entity tasked to support the implementation and use of LEI. 

In India, LEI code may be obtained from Legal Entity Identifier India Ltd. (LEIL), a subsidiary of Clearing Corporation of India Ltd. (CCIL), which has been recognised by Reserve Bank of India (RBI) as issuer of LEI under Payment and Settlement Systems Act, 2007 and is accredited by GLEIF as LOU in India for issuance and management of LEI.

Who shall obtain LEI code?

1. OTC derivatives markets 

All participants (other than individuals) in Over-the-Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives and credit derivatives in India need to obtain the unique LEI code. 

2. Large corporate borrowers 

Large corporate borrowers having total exposures of ₹50 crore and above need to obtain LEI code, without which they are not to be granted renewal / enhancement of credit facilities. 

3. Participation in non-derivative markets 

All participants (other than individuals) undertaking transactions in the markets regulated by RBI viz., Government securities markets, money markets and non-derivative forex markets (transactions that settle on or before the spot date) need to obtain LEI codes. Transactions undertaken on recognized stock exchanges are outside the purview of LEI requirement. In case of non-derivative forex transactions, while all inter-bank transactions are subject to LEI requirement, client transactions require LEI code for transactions involving an amount equivalent to or exceeding USD 1 million or equivalent thereof in other currencies.

4. Large Value Transactions in Centralised Payment Systems 

With effect from April 01, 2021, all payment transactions of value ₹50 crore and above undertaken by entities (non-individuals) using RBI-run Centralised Payment Systems viz. RTGS and NEFT need to mention LEI code.

5. Cross-border Transactions 

AD Category-I banks, with effect from October 1, 2022, shall obtain LEI number from resident entities (non-individuals) undertaking capital or current account transactions of ₹50 crore and above (per transaction) under FEMA, 1999. Once an entity has obtained LEI number, it must be reported in all transactions of that entity, irrespective of transaction size.

6. Borrowers 

Non-individual borrowers enjoying aggregate exposure of ₹5 crore and above from banks and financial institutions shall obtain LEI codes as per the timeline given below –

Total ExposureLEI to be obtained on or before
Above ₹25 croreApril 30, 2023
Above ₹10 crore, up to ₹25 croreApril 30, 2024
₹5 crore and above, up to ₹10 croreApril 30, 2025

Banks – Scheduled Commercial Banks (excluding RRBs), Local Area Banks, Small Finance Banks and UCBs.

Financial Institutions (FIs) – All India Financial Institutions (Exim Bank, SIDBI, NHB, NABARD and NaBFID) and NBFCs (including HFCs).

Exposure – all fund based and non-fund based (credit as well as investment) exposure of banks / FIs to the borrower. Aggregate sanctioned limit or outstanding balance, whichever is higher, shall be reckoned for the purpose.

Borrowers who fail to obtain LEI codes from an authorized Local Operating Unit (LOU) shall not be sanctioned any new exposure nor shall they be granted renewal / enhancement of any existing exposure. However, Departments / Agencies of Central and State Governments (not Public Sector Undertakings registered under Companies Act or established as Corporation under the relevant statute) are exempted from this provision.


References

Reserve Bank of India. (2017, November 02). 'Introduction of Legal Entity Identifier for large corporate borrowers'. Retrieved from https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11154&Mode=0

Reserve Bank of India. (2017, June 01). 'Introduction of Legal Entity Identifier for OTC derivatives markets'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10988&Mode=0

Reserve Bank of India. (2018, November 29). 'Legal Entity Identifier Code for participation in non-derivative markets'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11424&Mode=0

Reserve Bank of India. (2021, August 12). 'FAQ-Legal Entity Identifier (LEI) for Large Value Transactions in Centralised Payment Systems'. Retrieved from https://www.rbi.org.in/Scripts/FAQView.aspx?Id=140

Reserve Bank of India. (2021, December 10). 'Introduction of Legal Entity Identifier for Cross-border Transactions'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12206&Mode=0

Reserve Bank of India. (2021, January 05). 'Introduction of Legal Entity Identifier for Large Value Transactions in Centralised Payment Systems'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12010&Mode=0

Reserve Bank of India. (2022, April 21). 'Legal Entity Identifier (LEI) for Borrowers'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12301&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Nomination for demat accounts and mutual fund folios

Securities and Exchange Board of India (SEBI) had revised the guidelines on nomination for demat accounts and mutual fund folios.   Which entities are covered by the guidelines? The following regulated entities (REs) are covered by the guidelines – Asset Management Companies (AMCs) of Mutual Funds (MFs) and their Registrars to an issue and share Transfer Agents (RTAs)  Association of Mutual Funds in India (AMFI)  Recognized Depositories  Registered Depository Participants (DPs) What are the guidelines on nomination facility? Nomination shall be mandatory for single holding and optional for jointly held accounts / folios. However, an investor having single holding / account / folio can opt-out of nomination, either online or through physical / offline mode. In case a joint account / folio becomes single holding, post the demise of holders, either nomination or ‘opt-out’, is mandatory. Investors shall have the option to specify guardians when nominees are minors....
Post a Comment
Read more

Framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)

Reserve Bank of India (RBI) had released the framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs). What is the need of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)? Industry self-governance helps in industry-wide smooth operations and ecosystem development. RBI’s Payment and Settlement Systems Vision 2019-21 had, therefore, envisaged the setting up of an SRO for PSOs. Accordingly, the framework for recognition of SRO for PSOs was released in October 2020. What shall be the role of SRO for PSOs? An SRO is a non-governmental organisation that sets and enforces rules and standards relating to the conduct of member entities in the industry, with the aim of protecting the customer and promoting ethical and professional standards.  The SRO is expected to resolve disputes among its members internally through mutually accepted processes to ensure that members operate in a disciplined environment and even accept penal ...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-I – Preamble and Section 1 to 13

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the first article in the series. Preamble of the Act RBI to – Regulate the issue of bank notes. Keep reserves for monetary stability in India. Operate currency and credit system of the country to its advantage. The primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth. Chapter I – Preliminary Section 1 – Short title, extent and commencement 1(1) – This Act may be called the Reserve Bank of India Act, 1934. 1(2) – The Act extends to whole of India. Chapter II - Incorporation, Capital, Management and Business Section 3 – Establishment and incorporation of Reserve Bank 3(1) – RBI to take over management of the currency from the Central Government. 3(2) – RBI to have perpetual succession, common seal, and shall by...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-III – Section 20 to 40

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the third article in the series.  Chapter III - Central Banking Functions Section 20 – Obligation of the Bank to transact Government business RBI shall undertake – To accept monies for account of the Central Government and to make payments up to the amount standing to the credit of its account, and to carry out its exchange, remittance and other banking operations. Management of the public debt of the Union. Section 21 – Bank to have the right to transact Government business in India The Central Government shall entrust RBI with – All its money, remittance, exchange and banking transactions in India, and shall deposit free of interest all its cash balances with RBI. The Central Government may carry on money transactions at places where RBI has no branches or agencies and m...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-II – Section 17 to 19

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the second article in the series.  Section 17 – Business which the Bank may transact RBI shall be authorized to carry on and transact the several kinds of business hereinafter specified, namely – 17(1) – Accept deposit without interest from the Central / State Government, local authorities, banks and any other persons. 17(1A) – Accept deposit, repayable with interest, from banks or any other person under the Standing Deposit Facility Scheme, as approved by the Central Board, for the purposes of liquidity management.   Bills of Exchange (B/E) & Promissory Note (PN) Bearing 2 or more good signatures, one of which shall be of B/E & PN arising out of Maturing within 17(2)(a) Purchase, sale and rediscou...
Post a Comment
Read more