RBI introduced Legal Entity Identifier for Large Value Transactions in Centralised Payment Systems

RBI introduced Legal Entity Identifier for Large Value Transactions in Centralised Payment Systems

The Legal Entity Identifier (LEI) is a 20-digit number that is utilized towards uniquely identifying parties to financial transactions throughout the world. It has been conceived as a major measure towards increasing the quality as well as the accuracy of financial data systems for better risk management after the Global Financial Crisis.

The Reserve Bank Of India has now decided in order to introduce the Legal Entity Identifier (LEI) system for all payment transactions worth Rs.50 crore and above undertaken through entities (non-individuals) utilizing Reserve Bank-run Centralised Payment Systems viz. Real-Time Gross Settlement (RTGS) as well as National Electronic Funds Transfer (NEFT).

The Legal Entity Identifier (LEI) had been introduced by the Reserve Bank in a phased method for the participants in the over the counter (OTC) derivative and non-derivative markets as well as for big corporate borrowers.

Under the Reserve Bank of India’s new guidelines, the member banks must advise entities who take on large value transactions, i.e., Rs 50 crore and above towards obtaining the Legal Entity Identifier (LEI) in time, if they don’t have one already.

Aside from this, member banks must consist of the remitter and beneficiary the Legal Entity Identifier (LEI) information in the payment messages of RTGS and NEFT. Also, they must keep records of all transactions value of Rs 50 crore and above by means of RTGS and/or NEFT.

Entities could get the Legal Entity Identifier (LEI) from any of the Local Operating Units (LOUs) accredited through the Global Legal Entity Identifier Foundation (GLEIF), the unit made in order to support the execution and use of Legal Entity Identifier (LEI). In India, Legal Entity Identifier (LEI) could be gained from Legal Entity Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in), which also recognized as an issuer of Legal Entity Identifier (LEI) by the Reserve Bank under the Payment and Settlement Systems Act, 2007.

These directions have been issued under Section 10 (2) along with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and shall be in force from 1st April 2021.

However, providing other details, the Reserve Bank of India had explained that on the point of bank clienteles who should obtain the Legal Entity Identifier (LEI). According to RBI, all non-individual clienteles starting or receiving transactions of Rs 50 crore and above via RTGS and/or NEFT should get Legal Entity Identifier (LEI).

Also, the Reserve Bank of India stated that the Legal Entity Identifier (LEI) information must be given in the ‘Remittance information’ field for RTGS client payment transactions. Although for NEFT outward debit messages, LEI information must be given in the ‘Sender to Receiver Information’ field.

Digital payment infra boosts

The Reserve Bank of India recently had stated operational rules for the Payments Infrastructure Development Fund (PIDF) Scheme, in a bid towards encouraging the deployment of digital payment infrastructure in tier-3 to tier-6 centers. The fund would be utilized to subsidize banks and non-banks for payment infrastructure deployment and shall be depending upon attaining specific targets.

The central bank had instituted an advisory council under the chairmanship of B P Kanungo, a deputy governor, so as to manage the fund. The PIDF would be operative for a period of 3 years from 1st January 2021 and might be extended for 2 more years contingent upon the progress.

Presently, the fund had an amount of Rs 345 crore, of which Rs 250 crore has been given by RBI. The main purpose of PIDF is to increase the number of acceptance devices multi-fold in the nation.

The Scheme is likely to benefit the acquiring banks and non-banks and merchants through lowering the overall acceptance infrastructure rate.

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