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Showing posts with label Legal Entity Identifier. Show all posts
Showing posts with label Legal Entity Identifier. Show all posts

Sunday, January 17, 2021

LEI makes a debut in Centralised Payment Systems

 



        Reserve Bank of India vide Cir No RBI/2020-21/82 DPSS.CO.OD No.901/06.24.001/2020-21 dt. January 05, 2021 laid down the road map for ‘rollout of Legal Entity Identifier for Large Value Transactions in Centralised Payment Systems’.

        The circular is addressed to ‘The Chairman / Managing Director / Chief Executive Officer of member banks participating in RTGS / NEFT’

Q: What is The Legal Entity Identifier (LEI)?

Ans: The Legal Entity Identifier (LEI) is a 20-digit number used to uniquely identify parties to financial transactions worldwide.

Legal Entity Identifier (LEI) was conceived as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis.

Q: What is the Legal Entity Identifier (LEI) background?

Ans: LEI has been introduced by the Reserve Bank in a phased manner for participants in the over the counter (OTC) derivative and non-derivative markets as also for large corporate borrowers.

The first circular on LEI was issued by Reserve Bank of India in November 2017, vide Cir. No RBI/2017-18/82 DBR.No.BP.BC.92/21.04.048/2017-18 dt. November 02, 2017

 

Q: What are the attributes of the of Legal Entity Identifier (LEI) ?

Ans: The International Organization for Standardization (ISO) 17442 standard defines a set of attributes or legal entity reference data that are the most essential elements of identification. The Legal Entity Identifier (LEI) code itself is neutral, with no embedded intelligence or country codes that could create unnecessary complexity for users.

 

The ISO 17442 standard specifies the minimum reference data, which must be supplied for each LEI. This data is usually referred as Level 1 Data - Who is who:

Q: What is the structure of Legal Entity Identifier (LEI)

Ans: An LEI number (Legal Entity Identifier) is a unique identification number which is issued to companies which operate in the global financial system. LEIs are based on ISO standard 17442:2012.

An LEI is issued only once for each company and consists of 20 characters:

·        The first 4 characters are unique to the LOU which has issued the LEI.

·        The 5th and 6th characters are the same for each company – 0.

·        The following 12 characters consist of letters and numbers and are unique for each company.

·        The final 2 characters are known as the checking characters.



The first LEIs were issued in December 2012. As of 3 January 2018, LEIs are mandatory for all companies that trade in securities.

Q: What is the change in Reserve Bank of India Cir No dt No RBI/2020-21/82 DPSS.CO.OD No.901/06.24.001/2020-21 dt. January 05, 2021?

Ans: RBI has intimated respective participants to roll-out the LEI system for all payment transactions of value ₹50 crore and above undertaken by entities (non-individuals) using Reserve Bank-run Centralised Payment Systems viz. Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT).

Q: What are the preparatory steps advised by RBI for the LEI rollout?

Ans: In preparation for the wider introduction of LEI across all payment transactions, member banks should:

advise entities who undertake large value transactions (₹50 crore and above) to obtain LEI in time, if they do not already have one;

Q: In what fields should the LEI Number be included in RTGS and NEFT Payment Messages?

Ans: Banks should include remitter and beneficiary LEI information in RTGS and NEFT payment messages (details of the identified fields in the messaging structures of RTGS and NEFT for inclusion of LEI information are at Annex);

Q: How can the entities obtain LEI?

Ans:  Entities can obtain LEI from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), the body tasked to support the implementation and use of LEI.

In India, LEI can be obtained from Legal Entity Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in), which is also recognised as an issuer of LEI by the Reserve Bank under the Payment and Settlement Systems Act, 2007.

Q: What is the effective roll out date of this directions?

Ans: The rollout date is April 1, 2021.

 

Annex:

Bank Customers who must obtain LEI - All non-individual customers initiating or receiving transactions of ₹50 crore and above through RTGS and / or NEFT.

Fields in NEFT and RTGS payment messages to be used for recording Remitter and Beneficiary LEI :

·        For RTGS customer payment transactions, LEI information shall be provided in ‘Remittance information’ field.

·        For NEFT outward debit messages, LEI information shall be provided in ‘Sender to Receiver Information’ field.

 

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