Home   »   Legal Entity Identifier

Legal Entity Identifier

 

Legal Entity Identifier: Relevance

  • GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

 

Legal Entity Identifier: Context

  • RBI has recently said that from October next year, companies will have to quote the legal entity identifier (LEI) number so as to undertaking cross-border transactions of Rs 50 crore or more.

 

What is LEI?

  • The Legal Entity Identifier (LEI) is a 20-character alpha-numeric code used to uniquely identify parties to financial transactions worldwide.
  • The Legal Entity Identifier (LEI) is a reference code — like a bar code — used across markets and jurisdictions to uniquely identify a legally distinct entity that engages in a financial transaction.
  • The LEI is designed to be a linchpin for financial data — the first global and unique entity identifier enabling risk managers and regulators to identify parties to financial transactions instantly and precisely.

 

Why LEI needed?

  • When Lehman Brothers collapsed in September 2008, regulators and private-sector firms were unable to assess quickly and fully the extent of market participants’ exposure to Lehman and how the vast network of market participants was connected.
  • The financial crisis underscored the need for a global system to identify financial connections, so regulators and private sector firms could better understand the true nature of risk exposures across the financial system.
  • The establishment of the global LEI system is a significant achievement that responds to these vulnerabilities and provides meaningful, long-term benefits for the public and private sectors.

 

Legal Entity Identifier_40.1

 

LEI purpose

  • To improve the quality and accuracy of financial data reporting systems for better risk management.
  • To create a global reference data system that uniquely identifies every legal entity in any jurisdiction that is party to a financial transaction.

 

LEI 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. (LEIL), which is also recognised as an issuer of LEI by the Reserve Bank.

 

Legal Entity Identifier_50.1

 

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.
  • It 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.

 

Is LEI required for Central Government or State Governments and/or their departments?

  • It is not necessary for Governments or their Departments / Ministries to obtain LEI or mention LEI number for payment transactions in NEFT and RTGS.
  • However, Corporations / Undertakings, including those fully owned by the Government, shall need to obtain LEI.

 

Is LEI required for individual customer transactions?

  • No, LEI is not required for customer transactions where both remitter and beneficiary are individuals.

 

Also Read:

International Solar Alliance (ISA) gets UN Observer Status Democracy Summit: India Participated in first Summit for Democracy One Commodity One Exchange’ Policy Dr. BR Ambedkar: International Ambedkar Conclave
Kasturirangan Committee on Western Ghats Paris Agreement for Climate Change World Inequality Report 2022 Pradhan Mantri Awas Yojana- Gramin
India-Russia Annual Summit AFSPA Explained: Know everything about the Act Underutilized POSHAN Outlays Ken Betwa Link Project
Thank You, Your details have been submitted we will get back to you.