Legal Entity Identifier: The Reserve Bank of India (RBI) on Friday said companies will have to mention a 20-digit valid entity identifier (LEI) number for transactions amounting to Rs 50 crore or more abroad from October 2022.
The LEI is a 20 digit number that ensures the identity of the parties to a financial transaction. It is used around the world to improve the quality and accuracy of financial data systems.
What RBI said in the circular: RBI said in one of its circulars that companies based in India will have to obtain LEI numbers from banks for transactions abroad for an amount of Rs 50 crore or more from October 1, 2022. This provision has been made under the FEMA (Foreign Exchange Management Act) Act, 1999. RBI said that in case of non-availability of information on LEI in respect of overseas entities, banks may complete the transaction.
The central bank is implementing LEI in the Indian financial system in a phased manner. It has been implementing the LEI regime for OTC derivatives, non-derivative markets, large corporate borrowers and parties involved in high value transactions.
The central bank has said that banks can encourage companies to issue LEI numbers for foreign transactions above Rs 50 crore even before October 1, 2022. However, once the LEI number is issued, the company will be required to mention the same in all its transactions.
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