Reserve Bank of India (RBI) has decided to make it mandatory to obtain Legal Entity Identifier (LEI) code.
- It is for corporate borrowers having aggregate exposure of Rs. 5 crore and above from any bank.
- The implementation of LEI will improve the quality and accuracy of financial data for better risk management.
- RBI has directed the banks to motivate large borrowers to obtain LEI for their parent entity as well as all subsidiaries and associates.
What is LEI?
- It is a 20-digit LEI code which is considered as a global standard to identify parties undertaking transactions internationally, post the Global Financial Crisis in 2008.
- In India, LEI code is issued by Legal Entity Identifier India.
- Legal Entity Identifier India works as a local operating unit for the global reference number.
- The code will be captured in CRILC, which is Central Repository of Information on Large Credits. This decision will help in the assessment and monitoring of aggregate borrowing by entity/ groups.
- It was developed the G20 in response to the inability of financial institutions to identify organisations uniquely.
- It tracks the their financial transactions in different national jurisdictions
- The first LEIs were issued in December 2012.
Code Structure
- The technical specification for LEI is ISO 17442.
- An LEI consists of a 20-character alphanumeric string, with the first 4 characters identifying the Local Operating Unit (LOU) that issued the LEI.
- Characters 5 and 6 are reserved as '00'. Characters 7-18 are the unique alphanumeric string assigned to the organisation by the LOU.
- The final 2 characters are checksum digits.
