A Legal Entity Identifier (LEI) is a unique 20-character alphanumeric code used to identify legal entities that wish to partake in financial transactions in the international market. The LEI code is based on the ISO 17442 standard developed by the International Organisation for Standardisation (ISO).
This identifier enhances the quality and accuracy of financial data systems for better risk management.
The legal entity’s LEI will be publicly available on a standardized database and contain information about the company’s registered and trading names, company type, registered address, registration number, parent company information, and child entity information.
Why was LEI created?
After the Global Financial Crisis in 2008, the authority needed something that could help keep an eye on financial transactions, confirm details of every corporation making global trades, and calculate the market risk.
This is when the Group of Twenty (G20) called on the Financial Stability Board (FSB) to recommend the LEI code that came into action in December 2012. They founded the Global Legal Entity Identifier Foundation (GLEIF) in 2014 to govern the whole LEI ecosystem.
LEI was created as a precaution against financial crises that may happen in the future. It is specially designed to make the financial world accurate, transparent, and trustworthy.
What are the benefits of the LEI code for Indian companies?
Likewise, we Indians have our unique identification numbers as Aadhar cards; your company should also have a unique identification number, i.e., LEI code. The benefits of the LEI code for Indian companies are as below:
- LEI code verifies the company is registered legally and actively working
- Makes cross-border transactions easy
- Boosts credibility not only within India but worldwide
- Helps to identify the relationship structure of the parent company and child company
- LEI code helps the loan approval process faster
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Who needs an LEI code in India?
All legal entities that take part in financial transactions on a global scale need an LEI code. In India, RBI introduced LEI first through the guidelines issued in June 2017 for participants in the OTC derivatives market. In November, RBI extended LEI for large corporate borrowers. In June 2020, the Insurance Regulatory and Development Authority of India issued a circular for insurers to obtain LEI. Since then, RBI has regulated multiple guidelines regarding the LEI code. There are more than 90,000 companies, including NGOs, Trusts, and Societies, that have an active LEI code in India. Read more here.
How to register for an LEI code?
Registering for an LEI code is simple. Whether it’s a new registration, renewal, or you wish to transfer your existing LEI – simply visit LEI Kart and apply for it in just two minutes. LEI Kart makes obtaining LEI code cost-effective, fast and worthy.
Latest RBI guidelines for obtaining an LEI code in India.
Since 2017, RBI has passed multiple guidelines regarding LEI numbers. The latest guidelines were passed on 21st April 2022, where it is mentioned that the companies with a total exposure of Rs. 5 crores will also have to obtain the code in the coming future. You’ll find the timeline to obtain an LEI code by borrowers as per RBI below.
|Total Exposure||LEI to be obtained on or before|
|Above ₹25 crore||30 April 2023|
|Above ₹10 crore, up to ₹25 crore||30 April 2024|
|₹5 crore and above, up to ₹10 crore||30 April 2025|