The Legal Entity Identifier (LEI) code has been conceived as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. The LEI code is a 20-character unique identity code assigned to entities who are parties to financial transactions. In respect of the applicability of LEI, the Reserve Bank of India (RBI) has issued various notifications from time to time to cover entities that will have to apply for LEI code.
Since most of you will have questions regarding the applicability and procedure for registration for LEI code, we thought it will be appropriate to put them down in FAQ format.
1. What is LEI Code?
LEI Code or Legal Entity Identifier is a 20-character unique identity code assigned to entities who are parties to financial transactions. Globally, it helps in labeling an entity with an Identity number that has entered into financing transactions and is registered with multiple agencies having varied registration numbers.
2. How does LEI code work?
LEI code is designed to enable the identification and linking of parties to financial transactions in order to manage counterparty risk. The goal is to improve the measuring and monitoring of systemic risk and support more cost-effective compliance with regulatory reporting requirements.
3. Which all financial transactions are covered till date under the implementation of LEI code?
Currently, all applicants transacting in Over-the-Counter (OTC) Derivative Markets, Large Corporate Borrowers and participants of Non-Derivative Markets, who fulfill the eligibility criteria are covered under the applicability of LEI code.
4. Which borrowers are covered under the Large Corporate Borrowers notification issued by RBI for LEI code applicability?
All entities having total fund-based and non-fund based exposure of Rs. 5 crore and above are termed as Large Corporate Borrowers. However, currently, LEI code is applicable only for entities having total exposure above Rs. 50 crores.
5. Which all transactions are covered under Non-Derivative Market notification issued by RBI for LEI code applicability?
All participants, other than individuals (including non-resident entities), undertaking transactions in markets regulated by RBI viz,
- Government Securities markets or
- Money markets (markets for the issue of any instrument with a maturity of one year or less) or
- Non-derivative forex markets (transactions that settle on or before the spot date) i.e. cash, tom and spot transactions.
are covered under RBI’s notification for LEI code applicability for non-derivative market participants.
6. Who should apply for LEI code?
Following companies cannot apply for the Scheme:
Any entity registered in India needs to apply for Legal Entity Identifier (LEI) code from time to time. The list of entities eligible to apply for LEI codes are Sole Proprietorships, Limited Liability Partnerships, Partnership Firms, Trusts, Private Limited Companies, Public Limited Companies, Government Companies, One Person Company, Insurance Companies, Housing Finance Companies, Non-Banking Finance Companies, Non-Profit making Companies, Special Purpose Vehicles – Trusts, Special Purpose Vehicles – Companies, SPV – Partnership Firms, SPV – Co-operative Societies or Multistate Co-operative Societies Mutual Fund, Mutual Funds-Sub Scheme, Alternative Investment Fund (AIF), AIF- Sub Scheme, Nationalised Banks, Scheduled Urban Cooperative Bank, Banking Companies – Others, Stand Alone Primary Dealers, Public Financial Institutions, Unlimited Companies, Cooperative Societies or Multistate Cooperative Societies, Government Organizations, Companies Limited by Guarantee, etc. Individuals acting in their natural capacity are currently outside the scope of applicability of LEI Code.
7. What is the deadline to apply?
The last date for application by entities dealing in the OTC market, large corporate borrowers and participants dealing in non-derivative markets having net worth above Rs. 2,000 million has already lapsed. Thus, all the above participants will have to compulsorily apply for LEI code to have all future transactions. The deadline for application of LEI code by participants dealing in non-derivative markets having net worth below Rs. 2,000 million was 31st March 2020 which is now extended to 30th September 2020 vide RBI notification dated 27th March 2020.
8. What are the consequences for non-application?
Entities dealing in OTC derivative markets will not be eligible to transact without a valid Legal Entity Identifier or LEI code. Borrowers who do not obtain LEI code will not be granted renewal/enhancement of credit facilities. Entities dealing in non-derivative markets transaction will not be able to undertake transactions in financial markets after the due date, either as an issuer or as an investor or as a seller/buyer. Transactions undertaken through the recognized stock exchanges are outside the purview of the LEI requirement.
9. Do all non-derivative forex transactions require Legal Entity Identifier (LEI) code?
In the case of non-derivative forex transactions, all inter-bank transactions will require LEI code. Non-derivative forex client transactions will require LEI code only for transactions involving an amount equivalent to or exceeding USD 10,00,000/- or other equivalent currencies.
10. Is LEI code applicable for Non-resident entities as well?
Non-resident entities undertaking financial transactions in the relevant markets will also require LEI code. Entities that are not legal entities in their country of incorporation (e.g., funds operated by a non-resident parent/management company that are each registered as an FPI) can use the LEI code of their parent/management company.
11. What is the validity of Legal Entity Identifier (LEI) code?
The validity of Legal Entity Identifier (LEI) Code is for a period of one year from the date of issuance or last renewal.
12. What is Legal Entity Identifier India Limited (LEIL)?
Legal Entity Identifier India Limited (CIN- U74900MH2015PLC268921) is a Wholly Owned Subsidiary of The Clearing Corporation of India Ltd. And it acts as a Local Operating Unit (LOU) for issuing globally compatible Legal Entity Identifiers (LEIs) in India.
13. What is the basic registration process for application for LEI code?
The basic registration process is as follows:
- Creating an account on www.ccilindia-lei.co.in website
- Submission of basic details.
- Getting an email confirmation for validation of the account created.
- Submission of documents, information, and payment of application fees.
- Verification of documents by Legal Entity Identifier India Limited team.
- Allotment of LEI Code / Rejection of application in case of inappropriate application.
14. What are the documents required for Legal Entity Identifier(LEI) code application?
List of documents required to be submitted can be searched on www.ccilindia-lei.co.in website under Download – Legal Doc Download tab. List of documents required are:
- Certificate of Incorporation/Registration Certificate
- PAN Card
- Undertaking-cum-Indemnity as per the format specified by LEIL
- Audited Financial Statements
- Board Resolution as per the format specified by LEIL or a certified true copy of the general board resolution or general power of attorney will be accepted if the legal entity commits to submit a fresh board resolution in the format as prescribed by LEIL when the next Board Meeting is held subsequently.
- Power of Attorney as per the format specified by LEIL in case of any further delegation by officials mentioned in Board Resolution.
- Audited financials of Immediate Parent and Ultimate Parent Entity or Auditor’s Certificate as per the format specified by LEIL in case of an immediate parent and ultimate parent entity.
It is to be noted that, there is no need to submit the documents physically if all the documents are submitted online and payment is made successfully online.
15. What are the registration charges for application for LEI code?
A basic charge of Rs. 5,900/- (inclusive of GST) is required to be paid at the time of application of LEI code which can be paid via Internet Banking/Credit Card/Debit Card/ Demand Draft payable at Mumbai.
16. What is the time frame within which the LEI code will be issued after the application for the same?
After submission of all the documents online or receipt of all physical documents at LEIL office (in case if all documents are not submitted online) and payment of application fees, LEIL generally issues LEI code within 3 to 5 working days.
17. How can InCorp Advisory assist you?
We at InCorp have studied in detail the procedure for obtaining LEI code and thereby we can assist you in obtaining Legal Entity Identifier (LEI) code for your entity. Our team of experts will assist you in case of any further queries.