LEI, a unique global identifier for legal entities participating in financial transactions, is designed to create a global reference data system that uniquely identifies every legal entity, in any jurisdiction, that is party to a financial transaction. It is a unique 20-character code to identify legally distinct entities that engage in financial transactions.
Legal Entity Identifier (LEI)
Legal Entity Identifier (LEI) is a 20-digit unique generated number used to identify parties worldwide to ignore financial activities and obtain precise financial data, hence controlling risk.
The Legal Entity Identifier (LEI) is produced independently for each non-individual party and is not relevant in customer transactions where both the remitter and the beneficiary are persons.
The goal of developing the Legal Entity Identifier (LEI) is to create a worldwide reference data system that uniquely identifies every legal entity in any country that is involved in a financial transaction.
Borrowers must renew their Legal Entity Identifier (LEI) by the guidelines of the Global Legal Entity Identifier Foundation (GLEIF), and Banks and Financial Institutions are responsible for the renewal.
RBI guidelines for Legal Entity Identifier (LEI) for Borrowers
The central bank stated in a notification Circular no. RBI/2022-23/34 DOR.CRE.REC.28/21.04.048/2022-23, Dated: 21.04.2022 that following a review, it has been determined that the rules on LEI would be extended to Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs).
Previously, the RBI decided in Circular no. RBI/2017-18/82 DBR No.BP.BC.92/21.04.048/2017-18, Dated: 02.11.2017, that banks should advise their existing large corporate borrowers with total exposures of Rs. 50 crore and above to obtain LEI codes within the timeframes specified in the schedule annexed to the Circular. Banks should also push major borrowers to get LEI for both their parent organization and their subsidiaries and affiliates.
The RBI has now decided to extend the Legal Entity Identifier (LEI) rules to Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs). Furthermore, the RBI has advised that non-individual borrowers with aggregate exposure of Rs. 5 crores or more from banks and financial institutions must get LEI codes within the timeframes mentioned in the Circular. All fund-based and non-fund-based (credit and investment) exposure of banks/FIs to the borrower should be included in the word “exposure.” The higher the aggregate sanctioned limit or the outstanding balance must be used for this purpose.
Furthermore, the RBI has said that borrowers who do not secure LEI codes from an approved Local Operating Unit (LOU) would not be awarded any new exposure or renewal/enhancement of any existing exposure. Departments/Agencies of the Central and State Governments, however, are excluded from the clause if they are not Public Sector Undertakings registered under the Companies Act, 2013 or constituted as Corporations under the appropriate law.
Who needs a Legal Entity Identifier (LEI)?
The legal entity identifier (LEI) is compulsory in the making of interest rates, forex, and market outflows. The Reserve Bank of India (RBI) has also made LEI mandatory for companies and organizations with full fund-based and non-funded credit exposure over Rs 50 crore.
Documents required for registration of LEI
- Power of Attorney or legal letter
- Incorporation Certificate
- Certificate of Incumbency
- Registry Extract or official filling
- Article of Association
- Any other mandatory document that verifies the required LEI data, such as an annual report, Directors’ register, your audited accounts, etc.
Timeline to obtain LEI by Borrowers
| Exposure | Timeline |
| Over Rs. 25 crore | 30 April, 2023 |
| Above Rs. 10 crores and up to 25 crore | 30 April, 2024 |
| Rs. 5 crore- Rs 10 crore | 30 April, 2025 |
FAQs
What is an LEI (Legal Entity Identifier)?
An LEI (Legal Entity Identifier) is a unique 20-character code used to identify legally distinct entities involved in financial transactions. The LEI helps to enhance transparency in the global financial markets and improves the ability to track and monitor financial transactions across borders. It is issued to companies, government entities, and other legal organizations.
Who is required to obtain an LEI for non-individual borrowers?
- Companies
- Partnerships
- Limited Liability Partnerships (LLPs)
- Trusts