Legal Entity Identifier for Large Value Transactions in Centralised Payment Systems

Ashish M. Shaji

11 Jan, 2021

The Reserve Bank of India in a recently released notification announced the roll out of the Legal Entity Identifier (LEI) system from 1^st April, 2021. It will be for transactions of 50 crore rupees and above undertaken by entities through the Centralised payments systems. Let’s look at this in detail.

What do you mean by Legal Entity Identifier?

LEI is a 20 character alpha numeric code that is based on the ISO 17442 standards developed by the International Organization for Standardization. It connects key reference information that allows clear and unique identification of legal entities that participate in the financial transactions.

What is the purpose of Legal Entity Identifier?

This system was introduced as a response to the financial crisis and it is aimed to improve transparency in financial data systems. It helps in improving the quality as well as the accuracy of the financial data systems for a better risk management after 2008 financial crisis. 

What did RBI state in the notification released by it concerning LEI for large value transactions?

The RBI has stated that LEI shall be mandatory for all fund transfers of 50 crore rupees and above. LEI numbers of the beneficiaries and remitters are required to be included on all payment transactions of 50 crore rupees value made through the RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer). 

LEI is introduced by the Reserve Bank of India in a phased manner for participants in the over the counter derivative and non-derivative markets and also for large corporate borrowers.

As per the RBI guidelines, all non-individual entities that conduct fund transfers of 50 crore or more are required to secure LEI numbers from the Legal Entity Identifier India Limited. Moreover, banks that facilitate such large value transactions for their customers are required to maintain records. 

How to obtain the LEI code?

An LEI can be obtained by following the below mentioned steps:

• You may log onto the online portal https://www.ccilindia-lei.co.in and access the downloads tab. The checklist for documents and its formats necessary for submission are available there based upon the legal structure of the entity.
• A person is required to be appointed as an authorized person to look over and carry out the LEI code obtaining process. Such person can be appointed as an authorized person through resolution, power of attorney, voluntarily, as the case may be. The authorized person has the authority to create an account.
• The applicant entity is then required to upload all documents specified in the e-mail. The total size of the uploaded documents has to be 40 MB. In case the upload is not made through, then the documents can be sent to the following address- LEI India Limited, CCIL Bhavan, 3^rd floor, SK Bole Road, Dadar, West Mumbai- 400028.
• When the documents are uploaded or sent, they are then verified by the LEI India Limited with the application form. They may ask for any additional document, if needed.
• On successful submission and verification of the form, the LEI code shall be issued. The code is sent to the entity in e-mail and this code is provided to the banks.

It may be noted that the RBI has stated in the notification that entities may obtain LEI from any of the Local Operating Unit accredited by the Global LEI Foundation. It is a body that is tasked to support the implementation of LEI and its use in India. Further, it can be obtained from the above mentioned online portal which is also an issuer of Legal Entity Identifier by the RBI^[1].

Conclusion

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