Author: Nisha Verma, Commerce Graduate, Delhi University

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Evolution of Legal Entity Identifier

During 2007-2008, it was the time of financial crisis. So, the regulators realized that it was difficult to estimate the amount of risk exposure in the market. It became very hard to resolve the problems of failing institutions in the market. A single identification code which is unique to each financial institution was not available throughout the world. Therefore, a need of unique code for each country was recognized.

Then the LEI system came into existence by 2011 so that the organisations could be identified uniquely and their financial transactions could be tracked easily.

The first LEIs were developed in December 2012. Currently, there have been over 2 million LEIs created globally.

What is Legal Entity Identifier?

The Legal Entity Identifier is a unique identification code consists of 20 characters which is standardized with ISO certification 17442. Each LEI code contains details about ownership structure of an entity and provides the information about who manages whom and what is the constitution and address of the entity. Thus, the LEI data pool can be referred as a global directory, which enhances transparency in the global marketplace. Now it has become a legal requirement for many companies within the global financial system to have an LEI code. Many entities may have similar or same name. LEI Code gives unique identity to each company so they easily searched by their LEI Number.

LEI Code Structure

LEI Code consists 20 characters which is standardized with ISO certificate 17442 by the International Organization for Standardization (ISO).

1. First 4 characters identify the Local Operating Unit (LOU) that issued the LEI
2. Character 5 and 6 always have 0 value.
3. Characters 7 to 18 have unique value for each entity.
4. Character 19 and 20 are checksum digits for verification purposes

Is it mandatory to take LEI code in India?

1. Borrowers who fail to acquire LEI codes from an authorized Local Operating Unit (LOU) as per the time lines mentioned below will not be permitted to take any kind of enhancement or renewal of his existing exposure/loan.
2. No entity can book forward contracts from the banks without having LEI code.
3. Departments of Central and State Governments (not Public Sector Undertakings registered under Companies Act or established as Corporation under the relevant statute) are exempted from this provision.

Timelines to obtain LEI in India

1. As per RBI circular no. 314 dated 01.06.2017 It was decided to implement the LEI system for every participant in the Over the Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives like forward contracts and credit derivatives in India, in a phased manner. Thus, all the participants were required to get LEI code by the following time lines:

   Phases	Entities	Date by which the LEI code is to be obtained
   Phase I	Entities regulated by RBI / SEBI / IRDA / PFRDA and Corporates With Net Worth above Rs 10000 mn	August 1, 2017
   Phase II	Corporates With Net Worth between Rs 2000 mn and Rs 10000 mn	October 1, 2017
   Phase III	Corporates With Net Worth between Rs 700 mn and Rs 2000 mn	December 1, 2017
   Phase IV	Corporates With Net Worth between Rs 700 mn and below	March 31, 2018

2. Further as per RBI circular no. 82 dated 02.11.2017, it has been decided that LEI system for all borrowers of banks having total fund based and non-fund based exposure of ₹ 50 crore and above shall be implemented phase wise as detailed below:

   Phases	Total Exposure to banks	LEI code to be obtained by
   Phase 1	₹ 1000 crore and above	Mar 31, 2018
   Phase 2	Between ₹ 500 crore and ₹ 1000 crore	Jun 30, 2018
   Phase 3	Between ₹ 100 crore and ₹ 500 crore	Mar 31, 2019
   Phase 4	Between ₹ 50 crore and ₹ 100 crore	Dec 31, 2019

3. Again as per RBI circular no. 34 dated 21.04.2022, It has been decided that the non individual borrowers having credit exposure of Rs. 5.00 crore and above from any bank need to get LEI as per time lines given below:

   Phases	Total Exposure	LEI to be obtained on or before
   Phase 1	Above ₹25 crore	April 30, 2023
   Phase 2	Above ₹10 crore, up to ₹25 crore	April 30, 2024
   Phase 3	₹5 crore and above, up to ₹10 crore	April 30, 2025

Benefits of LEI Code to global financial institutions:

1. To simplify, standardize and provide unique identification to any legal entity globally.
2. LEI ensures to have one standard system for operational purposes worldwide.
3. According to RBI point of view, LEI helps in reducing the financial crisis in India.
4. It helps in improving transparency in financial data systems.
5. It prevents bank and credit providers from corporate borrowers from issuing the multiple loans against the same collateral by monitoring their exposures.

Benefits of LEI Code to business entities:

1. Provides a legal existence and unique identification to any company or entity.
2. Increased transparency in financial markets.
3. LEI Certificate helps in international business.
4. Increased trading credibility.
5. It gives benefit of security because the LEI data helps the customers, investors and stakeholders to find who they are dealing with.

How, Where and at what price to get the LEI Code

LEI prices can vary among various service providers. Every service provider has their own price structure for LEI registration. Therefore, it will be good to keep in mind the LEI price as the primary factor when applying for LEI Code. LEI code has to be renewed every year.

Various channels to apply for the LEI Code and their pricing:

Service Provider	Link	Pricing 1 Year	Pricing 2 Year	Pricing 3 Year	Pricing 4 Year	Pricing 5 Year
LEI Register India	https://www.legalentityidentifier.in/?ref=ibrlive	3990/-	8350/-	10950/-	14350/-	16900/-
Bloomberg	https://lei.bloomberg.com/	4875/-	N.A	N.A	N.A	N.A
INDIA LEI	https://indialei.in/	6700/-	N.A	14190/-	N.A	22475/-
LEIkart India	https://www.leikart.com/lei-registration/	3990/-	N.A	10950/-	N.A	16900/-

LEI Register India is the cheapest LEI issuer and very convenient to use. Click here to renew or issue LEI code.