New LEI Code System for Banks

2019 ias preliminary exam test series

The Reserve Bank of India will implement the Legal Entity Identifier (LEI) system for all participants in the over-the-counter markets for rupee interest rate derivatives, foreign currency derivatives and credit derivatives in India, in a phased manner.

The 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.

LEI is a 20-character unique identity code assigned to entities who are parties to a financial transaction. All current and future participants would be required to obtain the unique LEI code as per timelines indicated by the central bank.

According to the schedule for implementation of LEI, entities regulated by various financial sector regulators and corporates with net worth above ₹1,000 crore have to obtain LEI by August 1, 2017; corporates with net worth between ₹200 crore and ₹1,000 crore, by October 1, 2017; corporates with net worth between ₹70 crore and ₹200 crore, by December 1, 2017; and corporates with net worth of up to ₹70 crore, March 31, 2018.

The entities without an LEI code would not be eligible to participate in the OTC derivative markets after the date specified in the schedule.

Entities can obtain LEI from any of the local operating units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF) — the entity tasked to support the implementation and use of the LEI.

LEI code can be obtained from Legal Entity Identifier India (LEIL), which has been recognised by the Reserve Bank as an issuer of LEI under the Payment and Settlement Systems Act, 2007 and is accredited by the GLEIF as an LOU in India for issuance and management of LEI.

Current Affairs for IAS Exam