Who requires an LEI in India?
All legal entities involved in global financial transactions must have a Legal Entity Identifier (LEI) number. Before the LEI initiative, launched in 2011, financial authorities faced significant challenges verifying public information about companies across platforms. This lack of transparency contributed to financial instability, including the 2008 Financial Crisis.
The evolution of the LEI system
In 2011, the Group of Twenty (G20) tasked the Financial Stability Board (FSB) with developing a framework for the LEI system. By the end of 2012, the Global Legal Entity Identifier Foundation (GLEIF) was established to manage the implementation of LEI codes worldwide. Since then, the system has expanded across multiple financial sectors, enhancing transparency and risk management.
LEI in India: Key developments
In India, the Reserve Bank of India (RBI) introduced LEI in June 2017 for participants in the over-the-counter (OTC) derivatives market. Since then, RBI has gradually expanded LEI requirements:
- November 2017 – RBI extended LEI to large corporate borrowers.
- June 2020 – The Insurance Regulatory and Development Authority of India (IRDAI) mandated LEI codes for insurance companies.
- December 2021 – RBI required large-value transactions (₹50 crore and above) in the Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) systems to have an LEI.
- April 2023 – LEI was mandatory for cross-border transactions exceeding ₹50 crore.
Who needs an LEI code in India?
Legal entities
Per RBI guidelines, all business entities participating in financial transactions, including Private Limited, Public Limited, LLPs, Partnerships, and Proprietorships, are required to obtain an LEI number if their total exposure exceeds ₹50 crore.
Non-profit organizations
NGOs, Trusts, and Societies with financial exposure of ₹5 crore or more must also obtain an LEI code to comply with RBI regulations.
Financial institutions
RBI mandates LEI for all financial institutions, including:
✔ Commercial and central banks
✔ Investment firms
✔ Mortgage companies
✔ Credit unions
✔ Insurance companies
What is an LEI code?
A Legal Entity Identifier (LEI) is a 20-character alphanumeric code that uniquely identifies legal entities engaged in financial transactions. It provides clarity on who is who and who owns whom, ensuring transparency and reducing risks in global financial systems.
LEI code structure
The 20-digit LEI is structured as follows:
- First four digits – Identify the Local Operating Unit (LOU) issuing the LEI.
- 5th to 18th digits – Unique entity identifier.
- Last two digits – Verification check digits.
Why is an LEI important?
✔ Verifies the legitimacy of a business entity.
✔ Facilitates smoother financial transactions between entities.
✔ Enhances credibility both within India and internationally.
✔ Identifies the investment firm executing a transaction.
✔ Improves transparency and risk management while reducing financial fraud.
