RBI introduces legal entity identifiers to track large value transactions

LEI for all the transactions worth Rs. 50 crores and above will help banks and regulators in tracking large value transactions more closely.

Jan 8, 2021 17:47 ISTModified On: Jan 8, 2021 17:47 IST
Legal Entity Identifiers

The Reserve Bank of India informed on January 5, 2021, that the legal entity identifiers will be mandatory for all the fund transfers worth Rs. 50 crores and above. The Legal Entity Identifiers- LEI is a 20 digit number that will be used to uniquely identify the parties involved in financial transactions all over the world.

In an official notification, the bank regulator mentioned that LEI numbers of remitters and beneficiaries must be included on all the payment transactions of Rs. 50 crores which will be made via National Electronics Fund Transfer (NEFT) and Real-Time Gross Settlement (RTGS).

The Reserve Bank of India introduced LEI in a phased manner in OTC-Over the Counter derivative and non-derivative markets as also for the large corporate borrowers.

Significance:

LEI for all the transactions above Rs. 50 crores will help banks and regulators in tracking large value transactions more closely.

From where the LEI code can be obtained?

The code can also be easily obtained from local operating units. These are accredited by the Global Legal Entity Identifier Foundation which also implements and supports the use of LEI.

The code in India can be obtained from the Legal Entity Identifier India Ltd. It is a subsidiary of Clearing Corporation of India Ltd. recognized by RBI.

Guidelines by RBI:

As per the released guidelines, all the non-individual entities that will be conducting fund transfers worth Rs. 500 crores and above must secure the Legal Entity Identifiers numbers from Legal Entity Identifier India Ltd. In addition to this, banks who will be facilitating these large value transactions for their customers must also be maintaining the records.

When was the idea of LEI conceived?

The idea of the 20-digit unique code came for identifying parties to the financial transactions globally. It was conceived after the 2008 global financial crisis. It was done to improve the financial data systems and for strengthening risk management capabilities.

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