Legal Entity Identifier (LEI)

  • LEI is a 20-digit unique code to identify parties to financial transactions worldwide.
  • It is a global reference number that uniquely identifies every legal entity or structure that is party to a financial transaction, in any jurisdiction.
  • LEI code has been conceived as key measure to improve quality and accuracy of financial data systems for better risk management post the global financial crisis.
  • The LEI system was developed by G20 in response to inability of financial institutions to identify organisations uniquely, so that their financial transactions in different national jurisdictions can be fully tracked.
  • The first LEIs were issued in December 2012.
  • Why in news?
    • The Reserve Bank of India (RBI) has made 20-digit Legal Entity Identifier (LEI) compulsory for companies having aggregate fund-based and non-fund based exposure over Rs 5 crore.
    • The move is aimed at improving risk management in wake of huge stressed assets in banking system.

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