All legal entities that take part in financial transactions on a global scale need a Legal Entity Identifier(LEI) number. Before the LEI initiative, which took place in 2011, it was impossible for any authority to check public information about a company, furthermore from one platform. This can also be blamed to be one of the reasons behind the Financial Crisis of 2008.
In 2011, the Group of Twenty (G20) called on the Financial Stability Board (FSB) to provide recommendations on Legal Entity Identifier (LEI) and a supporting governance structure which came into action by the end of 2012.
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.
As clearly mentioned, it is the legal entities that need an LEI code, no individual is required to obtain an LEI code. Read more to know about who needs an LEI code in India.
Definition of Legal Entity Identifier(LEI) code
Before knowing who needs the LEI code, it is necessary to know what the LEI code is. LEI code is a key measure to improve the quality and accuracy of financial data systems for better risk management that came into action after the Global Financial Crisis. It verifies ‘who is who’ and “‘who owns whom’.” The LEI code is a 20-digit alphanumeric unique identity code allocated to legal entities participating in financial transactions.
Benefits of Legal Entity Identifier(LEI) code
- LEI code verifies that the company is registered legally and actively working
- LEI code helps entities to step into financial transactions with other entities
- It boosts credibility not only within India but worldwide
- LEI code helps to identify the investment firm that is executing the transaction
- LEI is making financial data more accurate and transparent, and in addition, it is cost-effective.
To register your company’s LEI code, click here.
LEI number for a legal entity
Legal Entity Identifier number is now mandatory for different types of entities, including Private Limited, Public Limited, LLP, Partnership, and Proprietorship, whose total exposure is more than ₹50 crore as per the guidelines regulated by RBI.
LEI number for an organization
Whether it be NGO, Trust or Society, if you have an exposure of ₹5 crore and above, you need to have an LEI code. As per RBI guidelines, it will be mandatory for all entities and organizations to have a Legal Entity Identifier number if they have a total exposure of ₹5 crore and above.
You can register for the LEI code at LEI Kart
LEI number for financial institutions
RBI made it mandatory for all financial institutions to obtain an LEI code, including commercial banks, central banks, investment companies, mortgage firms, credit unions, and more.
Combination of LEI numbers
The Legal Entity Identifier(LEI) is a 20-digit unique alphanumeric code where the first four digits are dedicated to identifying the Local Operating Unit (LOU) that issues LEI numbers. The fifth and sixth numbers are values of zero. The eighth to eighteenth are combinations of letters and numbers that are dedicated to the unique identifier for the entity and the last two digits are for verification purposes.