RBI makes Legal Entity Identifier mandatory

Reserve Bank of India has decided to make Legal Entity Identifier (LEI) code mandatory for all market participants regulated by it.

“All participants, other than individuals, undertaking transactions in the markets regulated by the RBI — government securities markets, money markets (markets for any instrument with a maturity of one year or less) and non-derivative forex markets (transactions that settle on or before the spot date) — shall obtain LEI codes by the due date,” it said in a notification.

The LEI code has been conceived of 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 is a 20-character unique identity code assigned to entities who are parties to a financial transaction. Globally, use of LEI has expanded beyond derivative reporting and it is being used in areas relating to banking, securities market, credit rating and market supervision.

The LEI system has been implemented in a phased manner for participants (other than individuals) in the over-the-counter markets for rupee interest rate derivatives, foreign currency derivatives and credit derivatives in India. “Transactions undertaken on recognised stock exchanges are outside the purview of the LEI requirement,” the RBI said.