RBI to Introduce LEI for Large-Value Transactions in RTGS/NEFT from April, 2021

On January 5, 2021, the Reserve Bank of India (RBI) announced the introduction of Legal Entity Identifier (LEI) for all payment transactions of Rs 50 crore and above undertaken by entities through Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT).

• The directions for the same have been issued by RBI under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007).
• The LEI system will be effective from April 1, 2021 for participants in the over the counter (OTC) derivative and non-derivative markets.

What is a Legal Entity Identifier (LEI)?

It is a unique 20-digit global reference number to identify legal entities participating in financial transactions. It makes the identification of an entity easy in the global database.

• It will act as a key measure to improve the quality and accuracy of financial data systems for better risk management.

Responsibilities of banks with regards to LEI:

–To advise eligible entities to acquire LEI in time, if they do not possess.

–To include remitter and beneficiary LEI information in RTGS and NEFT payment messages.

–To maintain records of all transactions of Rs 50 crore and above through RTGS or NEFT.

From where LEI can be obtained?

It can be obtained from any of the Local Operating Units (LOUs) accredited by the global umbrella organisation Global Legal Entity Identifier Foundation (GLEIF) based in Basel, Switzerland.

• In India, LEI can be obtained from Mumbai (Maharashtra) based Legal Entity Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in). It is a RBI recognized issuer of LEI and GLEIF accredited LOU under the Payment and Settlement Systems Act, 2007.
• LEIL is a wholly owned subsidiary of the Clearing Corporation of India Ltd (CCIL).

Recent Related News:

i.On November 5, 2020, RBI has revised the loan scheme of the Co-origination Model between Banks and Non-Banking Financial Companies – Non-Deposit taking – Systemically Important (NBFC-ND-SIs) launched in September 2018 with the improved “Co-Lending Model (CLM)”.

ii.The Internal Working Group (IWG) of RBI has recommended an increase in the promoters’ stake in Private Banks to 26% from 15% of the paid-up voting equity share capital of the bank in 15 years.

About Reserve Bank of India (RBI):

Formation– 1 April 1935
Governor– Shaktikanta Das
Headquarters– Mumbai, Maharashtra
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, and M Rajeswar Rao)