Page 51 - Banking Finance January 2022

RBI CIRCULAR

Introduction of Legal Entity Identifier for Management Act (FEMA), 1999 (42 of 1999) and are
without prejudice to permissions/approvals, if any,
Cross-border Transactions required under any other law.
RBI/2021-22/137
Ajay Kumar Misra
December 10, 2021 Chief General Manager-in-Charge

1. The Legal Entity Identifier (LEI) is a 20-digit number
used to uniquely identify parties to financial Prompt Corrective Action (PCA)
transactions worldwide to improve the quality and Framework for Non-Banking Financial
accuracy of financial data systems. LEI has been
introduced by the Reserve Bank in a phased manner Companies (NBFCs)
for participants in the over the counter (OTC) RBI/2021-2022/139
derivative, non-derivative markets, large corporate
borrowers and large value transactions in centralised December 14, 2021
payment systems.
1. Reserve Bank of India had introduced a Prompt
2. In order to further harness the benefits of LEI, it has been Corrective Action Framework (PCA) for Scheduled
decided that AD Category I banks, with effect from Commercial Banks in 2002 and the same has been
October 1, 2022, shall obtain the LEI number from the reviewed from time to time based on the experience
resident entities (non-individuals) undertaking capital or gained and developments in the banking system. The
current account transactions of ?50 crore and above (per objective of the PCA Framework is to enable Supervisory
transaction) under FEMA, 1999. As regards non-resident intervention at appropriate time and require the
counterparts/ overseas entities, in case of non-availability Supervised Entity to initiate and implement remedial
of LEI information, AD Category I banks may process the measures in a timely manner, so as to restore its financial
transactions to avoid disruptions. Further, AD Category I health. The PCA Framework is also intended to act as a
banks may encourage concerned entities to voluntarily tool for effective market discipline. The PCA Framework
furnish LEI while undertaking transactions even before does not preclude the Reserve Bank of India from taking
October 1, 2022. Once an entity has obtained an LEI any other action as it deems fit at any time in addition
number, it must be reported in all transactions of that to the corrective actions prescribed in the Framework.
entity, irrespective of transaction size.
2. NBFCs have been growing in size and have substantial
3. AD Category-I banks shall have the required systems in interconnectedness with other segments of the financial
place to capture the LEI information and ensure that system. Accordingly, it has now been decided to put in
any LEI captured is validated against the global LEI place a PCA Framework for NBFCs to further strengthen
database available on the website of the Global Legal the supervisory tools applicable to NBFCs. The PCA
Entity Identifier Foundation (GLEIF). Framework for NBFCs, as contained in the enclosed
4. AD banks may bring the contents of this circular to the Annex, comes into effect from October 1, 2022, based on
notice of their constituents concerned and advise the financial position of NBFCs on or after March 31, 2022.
entities who undertake large value transactions (?50 3. In terms of extant regulations, Government NBFCs have
crore and above) under FEMA, 1999 to obtain LEI in been provided time upto March 31, 2022 to adhere to
time, if they do not already have one issued. the capital adequacy norms provided for NBFCs (Ref.
5. Entities can obtain LEI from any of the Local Operating Annex I of Non-Banking Financial Company -
Units (LOUs) accredited by the GLEIF, the body tasked Systemically Important Non-Deposit taking Company
to support the implementation and use of LEI. In India, and Deposit taking Company (Reserve Bank) Directions,
LEI can be obtained from Legal Entity Identifier India 2016). Accordingly, a separate circular would be issued
Ltd. (LEIL) (https://www.ccilindia-lei.co.in), which is also in due course with regard to applicability of PCA
recognised as an issuer of LEI by the Reserve Bank under Framework to Government NBFCs.
the Payment and Settlement Systems Act, 2007. The 4. The PCA Framework will be reviewed after three years
rules, procedures and documentation requirements of being in operation.
may be ascertained from LEIL.
6. The directions contained in this circular are being issued (Ajay Kumar Choudhary)
under sections 10(4) and 11(1) of the Foreign Exchange Chief General Manager-in-Charge

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