The Reserve Bank of India recently announced the introduction of Legal Entity Identifier System.
What is Legal Entity Identifier System?
- The Reserve Bank of India introduced the Legal Entity Identifier system for all payment transactions of fifty crores and above through NEFT (National Electronic Funds Transfer) and RTGS (Real Time Gross Settlement).
- The system is being introduced to identify the legal entities involved in financial transaction. The central bank has adopted the system to improve the quality and accuracy of the financial data systems.
- Under the system, the banks have to include information of the remitter and beneficiary.
Under which act has the Legal Entity Identifier system introduced in India?
Payment and Settlement Systems Act, 2007.
What is Legal Entity Identifier?
It is a twenty-digit unique number. It is a global identifier for entities participating in financial transactions. It is developed by International Organization for Standardization.
What is the validity of Legal Entity Identifier?
One year from the period of registration.
Why was Legal Entity Identifier System introduced?
During the financial crisis of 2008, the international regulators realized that there was no single code to each financial institution with which it can be identified in all countries universally. Every country had their own set of identity numbers. This made it difficult to assess the risk exposures, analyzing and resolving risks across the market.
When was the first LEI issued?
2012.
Does Legal Entity Identifier follow ISO?
Yes, it follows International Organization for Standardization.
What is the code structure of LEI?
It is an alpha-numeric string. The first four characters identify the local operating unit. The characters five to eighteen are assigned by the Local Operating Unit. The last two characters are Checksum digits. The Checksum digits are used to identified the errors that occur during the process of transaction.