From April 1, entities to quote LEI for all payment transactions of above 50 crores

The Legal Entity Identifier (LEI) is a 20-digit number used worldwide that will uniquely identify every legal entity or structure to a financial transaction. Pursuant to the Global Financial Crisis, the Legal Entity Identifier (LEI) code is conceived at the initiative of ‘Group of 20, financial stability Board’ for the purpose of better risk management. The Public authorities of various countries in their jurisdictions rely on the LEI to evaluate risk, take corrective steps and, if required, minimize market abuse, and improve the accuracy of financial data. In the US and Europe, the regulations require the use of LEIs to identify counterparties to transactions in regulatory reporting.  To support the implementation and use of the Legal Entity Identifier (LEI) the Global Legal Entity Identifier Foundation (GLEIF) is established by the Financial Stability Board in June 2014. The foundation is backed and overseen by the LEI Regulatory Oversight Committee, representing public authorities from around the globe that have come together to jointly drive forward transparency within the global financial markets. GLEIF is headquartered in Basel, Switzerland.

The Reserve Bank of India vide circular RBI/2016-17/314 FMRD.FMID No.14/11.01.007/2-16-17 dated June 01, 2017, has mandated the implementation of the LEI system for all participants in the Over-the-Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives, and credit derivatives in India, in a phased manner. Further, all corporate bank borrowers having total fund-based and non-fund based exposure of 5 crores and above to obtain Legal Entity Identifier (LEI)  registration in a phased manner and capture the same in the Central Repository of Information on Large Credits (CRILCS). Accordingly, banks were asked to advise their large corporate borrowers to obtain LEI. In the initial phase, borrowers having total exposures of above Rs.50 crore were asked to obtain LEI, and subsequently, borrowers of 5 crores and above were asked to obtain LEI in the phased manner. As per the above RBI direction, Borrowers who do not obtain LEI as per the schedule are not to be granted renewal/enhancement of credit facilities. “This will facilitate the assessment of aggregate borrowing by corporate groups, and monitoring of the financial profile of an entity/group. This requirement will be implemented in a calibrated, but time-bound manner” it said.

Payment transactions:

 “It has now been decided to introduce the LEI system for all payment transactions of value Rs 50 crore and above undertaken by entities (non-individuals) using Reserve Bank-run Centralised Payment Systems viz. Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT),” RBI said in a notification dated January 05, 2021. The above directions shall be effective from April 1, 2021, it added.

In preparation for the wider introduction of LEI across all payment transactions, RBI has asked the banks concerned to advise entities who undertake large value transactions to obtain LEI in time, if they do not already have one.

In India, LEI can be obtained from Legal Entity Identifier India Ltd (LEIL), which is also recognised as an issuer of LEI by the Reserve Bank under the Payment and Settlement Systems Act, 2007. For details, read: What is LEI?