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.
