Who Needs an LEI Code in India?
The Legal Entity Identifier (LEI) is a unique 20-character code that identifies legal entities participating in financial transactions. The LEI code is a global standard, introduced in response to the 2008 financial crisis, to improve transparency and reduce systemic risk in financial markets. In India, the LEI code is mandatory for certain categories of legal entities.
Listed Companies: All companies listed on the Indian stock exchanges are required to obtain an LEI code. This includes both equity and debt listed companies.
Entities Borrowing from Overseas: Entities in India that borrow funds from overseas must also obtain an LEI code. This includes both private sector and government entities.
Regulated Entities: Regulated entities such as banks, non-banking financial companies (NBFCs), insurance companies, and pension funds are also required to obtain an LEI code.
Large Corporate Borrowers: Any corporate borrower with an outstanding credit of more than Rs. 5 crore is required to obtain an LEI code.
Why is the LEI Code Required?
Risk Management: The LEI code helps in identifying the legal entity behind a financial transaction, which improves risk management and reduces the likelihood of fraud.
Transparency: The LEI code promotes transparency in financial markets by providing a standardized and unique identifier for legal entities.
Regulatory Compliance: The LEI code is a regulatory requirement for certain categories of legal entities in India. Failure to obtain an LEI code can result in fines or penalties.
Cross-border Transactions: The LEI code is required for cross-border transactions, particularly in Europe and the United States. Therefore, entities in India that engage in cross-border transactions must obtain an LEI code to comply with international regulations.
Conclusion
The LEI code is a unique identifier for legal entities participating in financial transactions. It is mandatory for listed companies, entities borrowing from overseas, regulated entities, and large corporate borrowers in India. The LEI code improves risk management, promotes transparency, and ensures regulatory compliance in financial markets. Therefore, legal entities in India that fall under the categories mentioned above should obtain an LEI code to avoid any legal repercussions.