Each LEI is a 20-digit alphanumeric code and an associated set of reference data elements for the unique identification of a legally distinct entity operating in financial markets. This global standard complies with the 2020 specifications of the International Organization for Standardization (ISO), as documented in ISO 17442-1:2020, Legal Entity Identifier (LEI). The Reserve Bank also said banks could encourage affected companies to voluntarily provide LEIs in transactions before October 1, 2022. This report, prepared in close consultation with the Global LEI Foundation (GLEIF), the LEI Regulatory Oversight Committee (ROC) and national authorities, contains a number of recommendations to promote the use of the LEI in cross-border payments and highlights the potential benefits of the LEI in supporting straight-through processing and KYC. The LEI was developed by the FSB to uniquely identify counterparties to cross-border financial transactions, thereby enhancing financial data for a variety of purposes. For example, to promote more accurate and timely aggregation of data on the same entity from different sources, in particular on a cross-border basis. In May 2019, the FSB published a thematic review on the implementation of the LEI. The G20 made improving cross-border payments a priority during Saudi Arabia`s presidency in 2020. Making cross-border payments, including credit transfers, faster, cheaper, more transparent and more inclusive, while ensuring their security, would bring significant benefits to citizens, businesses and economies around the world and would support economic growth, international trade, global development and financial inclusion.
“In order to further reap the benefits of the LEI, it has been decided that as of October 1, 2022, Class I AD banks will receive the LEI number of resident (non-personal) companies that engage in current capital or current account transactions of 50 crore or more (per transaction) in accordance with FEMA, 1999. In addition, Class I anti-dumping banks may encourage relevant entities to voluntarily provide LEIs for transactions made before 1 October 2022. Once a company has been given an LEI number, it must be reported in all transactions of that company, regardless of the size of the transaction. The LEI is a unique 20-digit alphanumeric number used to identify parties to financial transactions worldwide to improve the quality and accuracy of financial data systems for better risk management. It is used to create a global master data system that uniquely identifies each legal entity in each jurisdiction that is party to a financial transaction. Once an entity has been assigned an LEI number, it must be reported in all transactions of that entity, regardless of the size of the transaction. Category I AD banks have been requested to set up the necessary system to collect LEI information and ensure that it is validated against the global LEI database available on the Global Legal Entity Identifier Foundation (“GLEIF”) website, established by the Financial Stability Board, an international body that monitors and makes recommendations on the global financial system. Companies can obtain LEIs from any of the Local Business Units accredited by GLEIF, the body responsible for supporting the implementation and use of the LEI. In India, the LEI can be obtained from Local Entity Identifier India Ltd. www.ccilindia-lei.co.in/, which is also recognized by the RBI as an LEI issuer under the Payment and Settlement Systems Act 2007. From October next year, businesses will have to provide the Legal Entity Identifier (LEI) number to conduct cross-border transactions of Rs 50 crore or more, the Reserve Bank of India (RBI) said on Friday. In addition, the RBI clarified that Class I AD banks may encourage relevant entities to voluntarily provide LEIs if they transact before October 1, 2022.
Once an entity has been assigned an LEI number, it must be reported in all transactions of that entity, regardless of the size of the transaction. All single payment transactions worth EUR 50 billion by (non-retail) companies should include LEI information for remittances and payees. This applies to transactions made via the NEFT and RTGS payment systems. The LEI is not required for customer transactions where the sender and payee are individuals. For transactions where one or both parties are not individuals, the LEI is required. As of October 1, 2022, Class I AD banks will receive the LEI number of resident (non-retail) companies that intend to conduct current capital or current account transactions of €50 billion or more (per transaction) in accordance with FEMA, 1999. However, Class I anti-dumping banks may encourage such entities to voluntarily provide LEIs when completing specified transactions before 1 October 2022. In addition, Class I anti-dumping banks may process transactions with non-resident counterparties/foreign entities in the event of unavailability of LEI information to avoid disruption. Some of the largest multinational banks have thousands of legal entities, many with similar names, operating around the world. With the expansion of the global LEI system, it is designed to help regulators and market participants understand and document these complex corporate structures and hierarchies. The identifier has been gradually introduced by the central bank for participants in OTC derivatives, non-derivative markets, large corporate borrowers and high-value transactions in centralised payment systems. The Legal Entity Identifier (LEI) is a reference code – like a barcode – that is used in all markets and jurisdictions to uniquely identify a legally distinct entity involved in a financial transaction.
The LEI is designed to be the hub for financial data – the first global and unique entity identifier that allows risk managers and regulators to instantly and accurately identify parties to financial transactions. For example, a large international bank may have an LEI that identifies the parent company, as well as an LEI for each of its entities that buy or sell stocks, bonds, swaps or other transactions in the capital markets. The Global LEI System (GLEIS) was developed by the G20 in 2011 in response to the 2008 global financial crisis. At that time, the need for a more transparent financial system became evident.
