Legal Entity Identifier mandatory for all large corporate borrowers: RBI
The Reserve Bank of India (RBI) has made 20-digit Legal Entity Identifier (LEI) compulsory for companies having aggregate fund-based and non-fund based exposure over Rs 5 crore.
The move is aimed at improving risk management in wake of huge stressed assets in banking system. Before this, RBI had made LEI mandatory for transactions in interest rate, forex and credit derivative marke
LEI mechanism will help banks to effectively monitor debt exposure of corporate borrowers. It will also enable banks in preventing multiple loans to companies against the same collateral.
Legal Entity Identifier (LEI)
LEI is a 20-digit unique code to identify parties to financial transactions worldwide. It is a global reference number that uniquely identifies every legal entity or structure that is party to a financial transaction, in any jurisdiction. LEI code has been conceived as key measure to improve quality and accuracy of financial data systems for better risk management post the global financial crisis.
The LEI system was developed by G20 in response to inability of financial institutions to identify organisations uniquely, so that their financial transactions in different national jurisdictions can be fully tracked. The first LEIs were issued in December 2012.
Legal Entity Identifier India Limited (LEIL), a wholly-owned subsidiary of Clearing Corporation of India (CCI), acts as a local operating unit (LOU) for issuing globally compatible legal entity identifiers (LEIs) in India. Besides, entities can also obtain LEI from any of local operating units (LOUs) accredited by Global Legal Entity Identifier Foundation (GLEIF) – the entity tasked to support implementation and use of LEI.
Listing timeline for implementing LEI
Borrowers with fund and non-fund exposure of Rs 1,000 crore and above will have to get LEI by March 2018. Those having exposure between Rs 500 crore and Rs 1,000 crore have to obtain LEI code by June 2018 and those having between Rs 100 crore and Rs 500 crore by March 2019.
Separate roadmap for borrowers having exposure between Rs. 5 crore and up to Rs. 50 crore will be issued in due course. Borrowers who do not obtain LEI as per schedule will not be granted renewal or enhancement of credit facilities.
LEIL will assign LEIs to any legal identity including but not limited to all intermediary institutions, banks, partnership companies, mutual funds, trusts, holdings, special purpose vehicles (SPVs), asset management companies and all other institutions being parties to financial transactions.