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LEI RBI

LEI RBI stands for the fact that the Reserve Bank of India (RBI) has decided to inaugurate the Legal Entity Identifier (LEI) system for all payment transactions of value ₹50 crore and above handled by entities (non-individual) using the Reserve Bank-run Centralised Payment Systems with effect from April 1. 

 


The Reserve Bank of India (RBI)

The Reserve Bank of India is India’s central bank and regulatory body under the jurisdiction of the Ministry of Finance, Government of India. The central bank is in charge of the issue and supply of the Indian rupee, as well as the regulation of the Indian banking system. RBI plays the role of the bankers’ bank, regulating the banking sector. And has played an important role in India’s development story by financing the government in its developmental projects and policies.

LEI Requirement RBI

The Reserve Bank of India has prepared for the wider introduction of LEI across all payment transactions, by asking member banks participating in Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) to advise entities who undertake large value transactions – ₹50 crore and above, to obtain LEI RBI in time, unless already having one. Member banks must include remitter and recipient LEI RBI information in Real Time Gross Settlement ( RTGS)  and National Electronic Funds Transfer (NEFT) payment messages. They are even required to maintain the mentioned ₹50 crore and above transactions through RTGS and NEFT.

LEI code RBI

The Global LEI System (GLEIS) was born out of the 2008 Global Financial Crisis (GFC), when it became apparent that there was a greater need for transparency and security.

GLEIS ensures straight forward, unambiguous identification of participants in financial transactions. The basis of GLEIS is ISO 17442, developed by the International Organization for Standardization (ISO). This standard defines the details of clear legal recognition (LEI) in identifying the relevant legal identities taking part in a financial transaction.

The LEI is authorized by a number of EU directives such as EMIR , MiFIR & MIFID II & SFTR. The US has similar requirements such as the Dodd Frank Act, the OFR, the Federal Reserve and the Securities & Exchange commission (SEC).

 

LEI will be assigned on application from the legal entity and after due validation of data.

 

An LEI consists of 20 characters and will be issued to each company once:

  • The first 4 characters are unique to the LOU which has issued the LEI.
  • The 5th and 6th characters are the same – 0 for every company.
  • The following 12 characters consist of letters and numbers and are unique for each company.
  • The final 2 characters are known as the checking characters.

 

The Legal Entity Identifier information needs to be updated every 12 months.

 

Entities can obtain an LEI from any Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), the partner tasked to support the use and implementation of the LEI. In India LEI can be obtained from LEI Register India, who offers the fastest and most affordable LEI obtaining process.

Before the universal adoption of the open LEI system, there were many inefficient, predominantly proprietary identifiers that often provided false or outdated information. As information reliability is the foundation of trade, any shortcoming affects everything from the ability to process transactions to the capacity to discern systematic risk automatically. The open LEI system solves this problem by providing permanent, IP-free, unique identifiers for all entities who undertake financial transactions.

 

Anyone can access the open LEI data, that includes:

  1. Registered and trading names
  2. Company type (e.g. Fund, Trust, Limited Liability Company)
  3. Registered address(es)
  4. Company registration number
  5. Parent company information
  6. Child company information

The global open and available LEI  database can be accessed by LEI Search, a user-friendly interface to the Legal Entity Identifier (LEI) system. It is publicly available for free with updates provided on a daily basis.

LEI RBI circular


LEI has been introduced by the Reserve Bank in a phased manner for all participants in the over-the-counter (OTC) markets for rupee interest rate derivatives, foreign currency derivatives and credit derivatives in India in terms of RBI circular FMRD. FMID No. 14/11.01.007/2016-17 dated June 1, 2017 and for large corporate borrowers of banks in terms of RBI Circular DBR.No.BP.BC.92/21.04.048/2017-18 dated November 2, 2017.

All (non individuals) participants undertaking transactions in the markets regulated by RBI viz., Government securities markets, money markets (markets for any instrument with a maturity of one year or less) and non-derivative forex markets (transactions that settle on or before the spot date) shall obtain Legal Entity Identifier (LEI) codes by the due date indicated in the schedule given in Annex.

Only those who obtained an LEI code on or before the due dates applicable to them are able to undertake transactions in these financial markets after the due date, either as an issuer, an investor, as a seller or a buyer. Transactions undertaken on recognised stock exchanges are outside the purview of the LEI requirement.

While all inter-bank transactions are subject to LEI requirement, in case of non-derivative forex transactions, client transactions shall require LEI code for transactions involving an amount equivalent to or exceeding one million USD or equivalent in other currencies.

Financial transactions undertaken by non-resident entities in the relevant markets are also required to obtain an LEI code. Such entities that are not legal entities in their country of incorporation (e.g., funds operated by a non-resident parent/management company that are each registered as a Foreign Portfolio Investment) shall use the LEI code of the parent/management company.

All entities responsible for executing transactions, reporting or for depository functions in these markets should capture the LEI code of the transacting participants in their systems.
As mentioned before LEI code needs to be renewed yearly to keep the data accurate and up-to-date. Therefore all entities undertaking financial transactions should make sure that their LEI code is considered current under the rules of the Global LEI system. Lapsed LEI codes will be deemed invalid for transactions in markets regulated by RBI.

All the Directions are issued under section 45W, read with section 45U, of the Reserve Bank of India Act, 1934.