Legal Entity Identifier(LEI) Code
The Legal Entity Identifier (LEI) code is a 20-character, alpha-numeric code used globally to uniquely identify legal entities that participate in financial transactions. It acts like a global "barcode" for financial entities, making it easier to identify counterparties in transactions across different markets and jurisdictions.
In India, the Legal Entity Identifier India Limited (LEIL), a wholly-owned subsidiary of the Clearing Corporation of India Ltd. (CCIL), has been recognized by the Reserve Bank of India (RBI) as the sole Local Operating Unit (LOU) for issuing LEIs. LEIL is accredited by the Global Legal Entity Identifier Foundation (GLEIF).
Why is an LEI Code Required?
The LEI system was introduced to improve transparency and reduce systemic risk in the financial system, especially after the 2007-2009 financial crisis. It helps regulators and organizations to:
- Identify counterparties: Know exactly who they are transacting with.
- Manage risk: Better assess and manage counterparty exposure.
- Improve data quality: Ensure consistency and accuracy in financial data reporting.
- Comply with regulations: Many regulatory mandates globally and in India require the use of LEIs for certain financial transactions and entities.
In India, the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Insurance Regulatory and Development Authority 1 of India (IRDAI) have mandated LEI codes for various entities and transactions in a phased manner.