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Post at: Jun 10 2022

Legal Entity Identifier (LEI) for Borrowers

Recent Context

  • On April 21, 2022, Reserve Bank of India has been decided that the guidelines on LEI stand extended to Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs).

What is LEI and what is its purpose?

  • The Legal Entity Identifier (LEI) is a 20-character alpha-numeric code used to uniquely identify parties to financial transactions worldwide.
  • It has been implemented to improve the quality and accuracy of financial data reporting systems for better risk management. 
  • It is used to create a global reference data system that uniquely identifies every legal entity in any jurisdiction that is party to a financial transaction.
  • It can be obtained from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), the body tasked to support the implementation and use of LEI. 
  • In India, LEI can be obtained from Legal Entity Identifier India Ltd. 

Which transactions should include LEI information?

  • All single payment transactions of 50 crore and above undertaken by entities (non-individuals) should include remitter and beneficiary LEI information. 
  • This is applicable to transactions undertaken through the NEFT and RTGS payment systems.
  • In case of RTGS, both customer payment and inter-bank transactions, meeting the above criterion, should include LEI information.

Key Highlights

  • RBI 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 given timeline.

  • 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) shall be exempted from this provision.
     


 


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