​Legal Entity Identifier: Applicability and How to Apply LEI

​Legal Entity Identifier | Applicability and How to Apply LEI

In line with the Reserve Bank of India’s (RBI) notification dated January 5, 2021, regarding the “Introduction of Legal Entity Identifier for Large Value Transactions in Centralised Payment Systems,” RBI has mandated that banks require a Legal Entity Identifier (LEI) for payment transactions valued at ₹50 crores or more.

Expansion to UCBs and NBFCs: On April 21, 2022, the RBI extended LEI guidelines to Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs). Non-individual borrowers with aggregate exposures of ₹5 crore and above are required to obtain LEI codes by specified deadlines:​

• Above ₹25 crore: by April 30, 2023
• Above ₹10 crore up to ₹25 crore: by April 30, 2024
• ₹5 crore up to ₹10 crore: by April 30, 2025

Failure to obtain an LEI may result in restrictions on new or enhanced exposures.

Cross-Border Transactions: Effective October 1, 2022, the RBI mandated that Authorised Dealer Category I banks obtain LEI numbers from resident entities (non-individuals) undertaking capital or current account transactions of ₹50 crore and above under FEMA, 1999. This measure aims to enhance the quality and accuracy of financial data systems.

Large-Value Transactions: The RBI introduced the LEI system for all payment transactions of ₹50 crore and above conducted via Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT). Entities are advised to obtain LEI in a timely manner to ensure smooth processing of large-value transactions.

What is LEI?

A Legal Entity Identifier (LEI) is a unique 20-digit code used to identify entities involved in financial transactions globally. The introduction of LEI aims to enhance the quality and accuracy of financial data, thereby facilitating better risk management practices.

Under the new guidelines, any payment transactions (inward or outward) worth ₹50 crores and above, conducted by non-individual entities through RTGS or NEFT, must include the LEI of both the remitter and the beneficiary.

What actions are required?

If your organization engages in payment transactions exceeding ₹50 crores via RTGS/NEFT, it is necessary to obtain an LEI. In India, you can obtain the LEI from Legal Entity Identifier India Ltd. (LEIL), which is authorized by the Reserve Bank of India to issue LEIs.

To obtain a Legal Entity Identifier (LEI) in India, you can follow these steps:

1. Visit the LEI Issuer’s Website: The LEI in India is issued by entities that are authorized to issue Legal Entity Identifiers (LEIs).
2. Fill out the LEI Application Form: You will need to complete an application form, providing necessary details about your entity. This includes information such as:
   • Entity name
   • Legal structure
   • Registered address
   • Identification number (e.g., CIN for companies)
   • Contact details
3. Submit the Required Documents: You will be asked to submit documents that verify your entity’s identity, such as:
   • Proof of incorporation or registration (e.g., certificate of incorporation, partnership deed)
   • Address proof
   • Contact details of the authorized person within the entity
4. Payment of Fees: A fee is typically charged for issuing an LEI. The amount may vary depending on the issuing agency. Payment can usually be done online.
5. Review and Confirmation: After submitting the form and documents, the LEI issuer will review the information provided. If everything is in order, they will process your application.
6. Receive the LEI: Upon successful verification, the LEI will be issued to your entity. This 20-digit unique identifier will be assigned, and you will receive confirmation, often via email.
7. Renewal of LEI: LEIs are valid for one year. You will need to renew the LEI annually to keep it active.

In India, the Reserve Bank of India (RBI) recognizes a few entities that are authorized to issue Legal Entity Identifiers (LEIs). Here is the list of LEI issuers in India:

1. National Securities Depository Limited (NSDL)
2. Stockholding Corporation of India Ltd. (SCIL)
3. Legal Entity Identifier India Ltd. (LEIL)

These entities are authorized to issue and renew LEIs, which are necessary for conducting large-value financial transactions like those over ₹50 crores through systems like RTGS and NEFT.

You can visit their websites for further details on the process to obtain an LEI.

For Assistance in obtaining LEI feel free to reach out to us CA Rohit Bhatia 8889322204