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News from RBI for Borrowers

This update concerns all Scheduled Commercial Banks (Excluding Regional Rural Banks), India Financial Institutions, Small Finance Banks, Local Area Banks, Primary (Urban) Co-operative Banks, and
Non-Banking Financial Companies (including Housing Finance Companies).

Legal Entity Identifier (LEI) for Borrowers

The Legal Entity Identifier (LEI) for the participants of the OTC derivatives market has been implemented in a phased manner (RBI/2016-17/314 FMRD.FMID No.14/11.01.007/2-16-17) since June 01, 2017.

In a recent review, it has been decided that the guidelines on LEI stand extended to Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs).

It is also advised that non-individual borrowers enjoying aggregate exposure of ₹5 crore and above from banks and financial institutions (FIs) shall be required to obtain LEI codes as per the timeline given in the Annex.

“Exposure” in this case includes all fund-based and non-fund-based (credit as well as an investment) exposure of banks/FIs to the borrower.

Aggregate sanctioned limit or outstanding balance, whichever is higher, shall be reckoned for the purpose. Lenders may ascertain the position of aggregate exposure based on information available either with them, the CRILC database, or in the declaration obtained from the borrower.

It’s important to note that borrowers who fail to obtain LEI codes from an authorized organization like LEI Register shall not be sanctioned any new exposure nor shall they be granted renewal/enhancement of any existing exposure.

However, Departments or Agencies of Central and State Governments (not Public Sector Undertakings registered under the Companies Act or established as Corporation under the relevant statute) will continue to be exempted from this provision.

The given directions are issued under sections 21, 35A, and 56 of the Banking Regulation Act, 1949, sections 45JA and 45L of the Reserve Bank of India Act, 1934, section 30A of the National Housing Bank Act, 1987, and section 6 of the Factoring Regulation Act, 2011.