What is the purpose of an LEI in India?
The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). It connects to key reference information that enables a clear and unique identification of legal entities participating in financial transactions worldwide.
Each LEI contains well-structured reference data categorized into two sections:
Level 1 data – ‘Who is who’
Level 2 data – ‘Who owns whom’
Legal Entity Identifiers in India
The LEI has been mandated in India since 2017. The Reserve Bank of India introduced the LEI in a phased manner for participants in over-the-counter (OTC) derivative, non-derivative markets, and large corporate borrowers.
Having an LEI is mandatory and will enormously increase trust in your partners’ eyes. Possessing an active LEI shows that your business follows regulatory requirements and confirms that the information about your business is legitimate and up-to-date.
Like businesses use LEIs to verify each other, banks worldwide and in India use the code to confirm their customers’ identity and streamline the Know Your Customers (KYC) processes.
Why was the LEI introduced?
A Legal Entity Identifier number or code is required to ensure a more transparent financial market.
The G20 developed the Global LEI System (GLEIS) in 2011 in response to the 2008 Global Financial Crisis. This was when the need for a more transparent financial system became evident.
After forming the G20 concept, the Financial Stability Board (FSB) appointed a new not-for-profit organization, The Global Legal Entity Identifier Foundation (GLEIF), to watch over it.
The foundation doesn’t issue LEI codes but leaves them to a network of public and private companies acting as Local Operating Units (LOUs). Furthermore, to obtain an LEI code, you’ll need to reach an LEI Registration Agent.
