Background of LEI 

In the wake of the 2008 financial crisis, regulators worldwide acknowledged their inability to identify parties to transactions across markets, products, and regions. The Financial Stability Board (FSB), together with the finance ministers and central bank governors represented in the Group of 20 (G20), therefore, advocated developing a universal Legal Entity Identifier (LEI) applicable to any legal entity that engages in financial transactions. Implementation of the LEI will increase the authorities’ ability to evaluate systemic and emerging risk, identify trends and take corrective steps.

At its November 2011 Cannes Summit the G20 called upon the FSB to take the lead in developing recommendations for a global LEI and supporting governance structure.

The resulting FSB recommendations were subsequently endorsed by the G20 at its 2012 Los Cabos summit. The ‘G20 Leaders Declaration’ of 19 June 2012 states: “We endorse the FSB recommendations regarding the framework for the development of a global LEI system for parties to financial transactions, with a global governance framework representing the public interest. (...) We encourage the global adoption of the LEI to support authorities and market participants in identifying and managing financial risks.”

Following up on the recommendations of the FSB, authorities, working with the private sector, have developed the framework of a Global LEI System that provides, through the issuance of LEIs, unique identification of legal entities participating in financial transactions across the globe.

Meaning of Legal Entity Identifier (LEI)

The Legal Entity Identifier (LEI) initiative 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. More specifically, LEI is a unique 20-digit code that is assigned to a legal entity. 

Purpose behind LEI

The global LEI system (GLEIS) has been set up by regulatory authorities [including G20 and the Financial Stability Board (FSB)] to address the global financial crisis. The LEI is designed to enable the identification and linking of parties to financial transactions in order to manage counterparty risk. Its goal is to help improve the measuring and monitoring of systemic risk and support more cost-effective compliance with regulatory reporting requirements.

For whom it is mandatory to obtain LEI Code?

Date Asset Class/Market Participants Particulars Circular
02-06-2017 OTC derivatives markets The Reserve Bank of India has mandated the implementation of the LEI system for all participants in the Over-the-Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives and credit derivatives https://www.ccilindia-lei.co.in/Documents/02-Jun-2017.pdf
02-11-2017 Large corporate borrowers The Reserve Bank of India has mandated the phase-wise implementation of the LEI system for all borrowers of banks in India. Entities without an LEI code are not to be granted renewal / enhancement of credit facilities https://www.ccilindia-lei.co.in/Documents/02-Nov-2017.pdf
29-11-2019 Non derivative markets The Reserve Bank of India has mandated the phase-wise implementation of the LEI system for Non-derivative markets include Government securities markets, money markets and non-derivative forex markets (cash, tom and spot transactions). https://www.ccilindia-lei.co.in/Documents/29-Nov-2019.pdf
29-10-2019 Eligible Foreign Entities Securities and Board of India has mandated LEI code for Eligible Foreign Entities (EFEs) in the commodity derivatives market https://www.ccilindia-lei.co.in/Documents/29-Oct-2019.pdf
06-06-2020 Insurers/Corporate borrowers The Insurance Regulatory and Development Authority of India (IRDAI) has mandated implementation of the LEI system for all insurers and their corporate borrowers. https://www.ccilindia-lei.co.in/Documents/06-Jun-2020.pdf
05-01-2021 RTGS/NEFT Transactions The Reserve Bank of India has mandated the LEI Number for all payment transactions of value ₹50 crore and above undertaken by entities (non-individuals) for Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT). https://www.ccilindia-lei.co.in/Documents/05-Jan-2021.pdf
10-12-2021 Cross Border Transactions The Reserve Bank of India has mandated the LEI Number for cross border transactions such as capital or current account transactions of ₹50 crore and above. The timeline to obtain LEI Number is October 1,2022. https://www.ccilindia-lei.co.in/Documents/RBI_Cross_Border_Circular.pdf
21-03-2022 Legal Entity Identifier (LEI) for Borrowers The Reserve Bank of India has mandated the phase-wise implementation of the LEI system for borrowers of banks and FIs in India greater than 5 crores. Entities without an LEI code are not to be granted renewal / enhancement of credit facilities. https://www.ccilindia-lei.co.in/Documents/LEI_for_borrowers.pdf

Who can apply for LEI codes?

An entity registered in India needs to apply for LEI code from time to time. The list of entities eligible to apply for LEI codes are but not limited to;
  • Sole Proprietorships, 
  • Limited Liability Partnerships, 
  • Partnership Firms, 
  • Trusts, 
  • Private Limited Companies, 
  • Public Limited Companies, 
  • Government Companies, 
  • One Person Company, 
  • Insurance Companies, 
  • Housing Finance Companies, 
  • Non-Banking Finance Companies, 
  • Non-profit companies, 
  • Special Purpose Vehicles – ARC Trusts, 
  • Special Purpose Vehicles – Companies, 
  • SPV - Partnership Firms, 
  • SPV – Co-operative Societies or Multistate Co-operative Societies Mutual Fund, 
  • Mutual Funds-Sub Scheme,
  • Pension Fund, 
  • Pension Fund Sub-Scheme, 
  • Alternative Investment Fund (AIF), 
  • AIF- Sub Scheme, 
  • Nationalized Banks, 
  • Scheduled Urban Cooperative Bank, 
  • RRBs, 
  • Payment Banks, 
  • Banking Companies – Others,
  • Stand-Alone Primary Dealers, 
  • Public Financial Institutions,
  • Unlimited Companies, 
  • Cooperative Societies or Multistate Cooperative Societies, 
  • Government Organizations, 
  • Companies Limited by Guarantee, 
  • Provident/Superannuation/Gratuity/Insurance Fund, 
  • HUF, etc. 
  • Other entities as may be specified from time to time.

Documents required 

Documents required to be submitted LEI application are:-
  • Certificate of Incorporation/Registration Certificate,
  • PAN Card proof,
  • Undertaking –cum-Indemnity as per the format specified by LEIL1,
  • Audited Financial Statements,
  • Board Resolution as per the format specified by LEIL OR 
  • A certified true copy of the general board resolution or general power of attorney will be accepted if the legal entity commits to submit a fresh board resolution in the format as prescribed by LEIL when the next Board Meeting is held subsequently. 
  • Power of Attorney as per the format specified by LEIL in case of any further delegation by officials mentioned in Board Resolution,
  • Audited financials of Holding and Ultimate Parent or Auditor’s Certificate as per the format specified by LEIL in case of holding company and ultimate parent. 

Validity period of LEI

An LEI is valid for one year from the date of issuance/last renewal date.

Author Bio - 

Name - CS Prerna Gaur 
Qualification - Company Secretary 
Organization - MPS & Associates, Company Secretaries
Contact - +91-8468070899