RBI Mandates Identification Numbers To Track Large-Value Transfers
A security guard stands by a Reserve Bank of India (RBI) logo in the RBI building in Mumbai, India. (Photographer: Karen Dias/Bloomberg)

RBI Mandates Identification Numbers To Track Large-Value Transfers

The Reserve Bank of India, on Jan. 5, said legal entity identifiers will be mandatory for all fund transfers worth Rs 50 crore and above. The LEI is a 20-digit number used to uniquely identify parties involved in financial transactions world over.

The LEI numbers of the beneficiaries and remitters must be included on all transactions above Rs 50 crore made via the real time gross settlement system and national electronic fund transfer, the regulator said in its notification. The rule comes into place starting April 1, 2021.

The LEI was conceived as a system to improve the quality and accuracy of financial data post the global financial crisis of 2008. The RBI has been introducing LEI numbers in a phased manner for entities participating in over the counter derivative and non-derivative markets, as well as for large corporate borrowers.

It has now expanded its use.

All non-individual entities conducting fund transfers worth Rs 50 crore and above should secure LEI numbers from Legal Entity Identifier India Ltd. Additionally, banks facilitating these large value transactions for their customers must also maintain records, the RBI said.

Introduction of the LEI for all transactions above Rs 50 crore will help banks and regulators track large value transactions more closely. The regulator has taken other steps such as tightening rules for current accounts to increase scrutiny of end use of funds. Having standardised identification numbers may also help if a public credit registry is set up as planned in India.

According to KV Karthik, partner, financial advisory services at Deloitte, the LEI is designed to be a unique entity identifier that can enable risk managers and regulators to identify parties involved in financial transactions.

“At the time of registering for LEI, each entity is expected to provide information about it’s ownership structure," Karthik said. "This will enable identifying financial connections and help regulators, financial institutions and other involved parties better understand the true nature of risk exposures across the financial system, improve risk management efforts and promote market integrity."

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