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The Legal Entity Identifier (LEI) is a 20 digit code that identifies a legal entity or a structure in a global setup during financial transactions. This code acts as a unique identification number for the legal entities or structures in the world scenario at the time of financial transactions. It was first introduced in India by RBI circular in June 2017 for participants in the OTC derivatives market.
In November 2017 it was extended for large corporate borrowers by another circular by RBI. Following these circulars, Insurance Regulatory and Development Authority of India (IRDA), vide in the exercise of its powers under Section 34(1) of the Insurance Act 1938, issued a circular on 5th June 2020 to cover insurers under the LEI code.
IRDA circular provides for the LEI Code to the insures and loaners. On the advice of the Financial Stability Development Council, Sub – Committee (FSDC-SC), IRDA issued this circular to cover its regulated entities and entities dealing with the regulated entities to obtain LEI. The regulations stated in the circular are –
The regulations provide for insurers to compulsorily obtain LEI. Thus, every legal entity which gives insurance in India has to have LEI code necessarily. It also covers the corporate borrowers of these insurers. The insurers must advise them to get LEI and sanction loans to them only when they have LEI. Not all corporate borrowers are covered, only those having a total exposure above 50 crores are covered. LEI code is given only to legal entities and not individuals.
LEI registration in India is done by Legal Entity Identifier India Ltd (LEIL). LEIL is a subsidiary of Clearing Corporation of India and acts as a Local Operating Unit (LOU) for LEI registration in India. It is accredited by Global Legal Entity Identifier Foundation (GLEIF) which is an organisation for implementing LEI and maintains a global LEI Index. Every LEI registration is recorded and kept by GLEIF.
LEIL website provides information, details and steps of LEI registration. The Registration Agents recognised by GLEIF can also register LEI. These agents must be associated with LOU for registration. In India, these agents are associated with LEIL. They access the LEIL network to help their clients to obtain LEI code from LEIL. Thus, any legal entity or insurer or corporate borrower can get their LEI from LEIL or Registration Agents associated with LEIL.
LEI Registration for insurers and loaners is a measure to improve the quality and accuracy of the financial data system. IRDA regulations to include insurers and loaners help in better risk management in the present times of global financial crisis. It helps to detect and prevent borrowing against the same security from multiple borrowers. Thus, it helps to reduce financial risks and speed up the data validation process for financial service providers.
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