With the contemporary global financial system, it is crucially important to ensure high levels of transparency and accountability. The LEI is one of the instruments created to strengthen these features. The LEI is an extended unique code of 20 characters that consists of alphanumeric and refers to the legal entities that are connected to financial transactions. Here in this guide, you will get to know about how to get and maintain an LEI with special emphasis on the official LEI for India.
What is a Legal Entity Identifier?
LEI stands for Legal Entity Identifier used for identification of the legal entity that can take place in contract as well as other business.
The LEI is based on the International Standard identified with the number ISO 17442..
Structure of an LEI
- Characters 1-4: Specific to each of the Local Operating Units and placed by the ROC Secretariat.
- Characters 5-6: Characters, excluded from the set of printable characters (00).
- Characters 7-18: A 12-digit identification number that is disbursed by the LOU with clear and evident procedures that determine the number to be assigned to a specific borrower.
- Characters 19-20: Two check digits according to the-method described within the ISO 17442 standard.
Who Needs an LEI?
The official LEI for Indian companies is mandatory for several entities:
- The non-individual credit risk for borrowers of fund-based and non-fund based facility for an amount of ₹5 crore and above.
- Borrowers who are publishing companies with more than ₹50 crore exposures from banks, UCBs NBFCs, and AIFIs.
- Operating in Over the counter Derivatives and Foreign Exchange Markets.
- Commissioner of Income Tax brought entities which transacted ₹50 crore and above by way of the Real Time Gross Settlement (RTGS) system in the appellate field.
Steps to Obtain an LEI
1. Document Preparation
Open the website of LEI to get you LEI number and go to the section known as “Downloads”. Here are the necessary documents checklist as well as the format depending on the legal structure of the business.
2. Self-Registration
Choose an authorized individual to handle the LEI process of the organization or company. This person will make a user account on LEI.net portal by logging with their official email id and move on to the online form. The registration form consists of five pages:
- Company Information Page: This involves entering basic information of the company and account with which you intend using in preparing the financial statement.
- Holding Company Page: It is necessary to indicate details of the parent company.
- Ultimate Parent Page: Depending on the type of business, state who this company is often referred to as the ultimate parent company.
- Payment Page: Make sure that all the requirements for making the payment are fulfilled.
3. Payment
On completion of the form and submission the client has the option of online payment or through demand draft. When the payment is made online, a reference number is provided once the payment has been made and other requirements, documents required to be forwarded by email are provided. If the demand draft is chosen then the reference number and the email are sent at once.
4. Document Submission
Attach all the documents mentioned in the E-mail, in terms of scanning all the stuff required as per the E-mail. It is also important to note that the size of each file uploaded should not be more than 40MB. In the event that the upload is not successful, the documents can be faxed or physically posted to Legal Entity Identifier India Limited (LEIL) at the address provided.
5. Verification
In addition to the completed application form, it is necessary to attach other documents, which LEIL will check. If any more documents are needed, LEIL will ask for it. You might also be required to fill in the application form online and sometimes even make modifications to it.
6. Issuance of LEI Code
If the Indian LEI is verified successfully, it will be provided within a short period and an email containing the LEI will be sent to the user. This code must be made available to banks and other financial institutions as may be necessary.
Managing Your LEI
Renewal
The LEI must be updated periodically to the current status and the validity of regulation standards. Renewal makes certain that all the data that feeds into the Global LEI database is credible and current.
Official LEI Number Renewal Process
The process of renewal of the official LEI number also requires immediate action to prolong the LEI code validity. This is usually required on an annual basis, and the process usually takes between 30 to 60 days to start from the expiration date of the LEI. Indian LEI helps to easily renew it to maintain the compliance and the validate status of the LEI code.
Validity Check
You can verify your LEI through the Global Legal Entity Identifier Foundation’s website. This site namely offers the information about the validity of all the LEI codes and the other related information.
Official LEI Code Issuance Timeframe
The official issuance of the LEI code normally takes about 24 hours once all the documents and verification processes have been completed. Such efficient issuance process helps avoid serious interference with the other financial affairs and transactions, allowing for maintaining the reliability and openness of the financial markets.
Costs
However, one must pay a fee to obtain an LEI and also to keep the LEI active. The cost differs with the service provider one chooses to go with and the period the LEI is to be acquired for.
Why is the LEI Important?
Transparency and Risk Management
Banks request LEI code to promote more openness, good operational risks, and the probability of honest financial statements. The LEIs support the analysis of counterparty relationships as well as risk evaluation that in turn contributes to the increased stability of financial transactions.
Regulatory Compliance
Financial regulators, including RBI and SEBI, require the adoption of LEIs to adhere to ISDA standards. Holders of securities without carrying out this LEI assignment may encounter some challenges when engaging in securities transactions and other financial operations.
Enhanced Market Confidence
LEIs brings about increased transparency and hence increased trust among the members of the financial markets. Posing entities simplifies identification hence boosting investor and other stakeholders’ confidence, an aspect that helps promote market stability.
Facilitation of Regulatory Compliance
There is evidence that regulations become less burdensome when one has an LEI to work with. It becomes easy for the entities to satisfy common compliance for the precautionary measures for avoiding penalties.
Improved Data Quality
LEIs facilitate the verification that data provided by legal entities is correct and current. It is crucial for financial reporting, risk assessment and more important for compliance with the regulatory bodies.
Conclusion
Obtaining an official LEI number is a necessary action that is required by any participant of the financial market. The LEI issued from the Indian authoritative body is accurate, assists in mitigation of risks, and meets specified requirements. Thus, to get the LEI number and further maintain it, you should follow the steps described above.