The Reserve Bank of India has mandated the use of LEIs by all companies trading in Over-the-Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives and credit derivatives in India. Mandatory use of LEIs was phased in between August 1, 2017 and March 31, 2018, as per the RBI Notification dated June 1, 2017.
LEI use by large corporate borrowers is also mandated by the Reserve Bank of India, as per the RBI Notification dated November 2, 2017. As with the former directive, mandatory adoption of LEIs is being phased in over the period March 31, 2018 through to December 31, 2019. With corporate borrowers who borrow amounts of ₹ 1000 crores and above being required to obtain an LEI prior to Mar 31, 2018 and those borrowing between ₹ 500 crores and ₹ 1000 crores requiring LEIs prior to Jun 30, 2018. In 2019, corporate entities borrowing between ₹ 100 crores and ₹ 500 crores will need to obtain an LEI prior to Mar 31, 2019 and those borrowing between ₹ 50 crores and ₹ 100 crores needing an LEI before Dec 31, 2019.
In a notification dated November 29 2018, the RBI mandated use of LEIs by all participants, other than individuals, who wish to transact in markets regulated by the RBI including, Government securities markets, money markets (markets for any instrument with a maturity of one year or less) and non-derivative forex markets (transactions that settle on or before the spot date). LEIs are again to be phased in based on the Net Worth of the entity as follows: – Entities valued at more than Rs.10000 million will need to obtain an LEI prior to April 30, 2019. Those valued between Rs.2000 million and Rs 10000 million will require an LEI prior to August 31, 2019. Entities valued up to up to Rs.2000 million will need to obtain an LEI before March 31, 2020.
Indian companies operating within foreign markets may also require an LEI. For a comprehensive list of jurisdictions that require or request LEIs, please consult the GLEIF website: https://www.gleif.org/en/about-lei/regulatory-use-of-the-lei. You will note that LEIs are now required by the Central Banks of Argentina, Mexico, Russia, and India, as well as for certain transactions in Canada, the EU, Russia, Singapore, the US, the UK, Switzerland, South Africa and Malaysia, amongst others.
Whilst individuals are not required to possess an LEI, entities such as trusts, companies, pension funds, charities, academy schools, partnerships, and some unincorporated societies may be. LEIs are designed to identify the legal entity entering into financial transactions, not the financial instrument itself. As such, the process for applying for an LEI is the same for all legal entities, regardless of what instrument they will be trading.
LEIs should not be requested for individuals or for divisions of a company. If an operating division of a company requires an LEI, they should use the LEI obtained by their parent company. Separate branches of a legal entity are eligible to obtain a separate LEI if they are situated in different countries. Branches within the same country are only eligible to receive one LEI, so careful consideration should be given to which branch acquires the LEI. Moreover, the validity of the branch’s LEI is linked to that of the main branch. As such, it will be deemed to be invalid in circumstances where the main branch’s LEI is invalid (ie. If the LEI isn’t renewed). Needless to say, it is not possible for a branch of a company to apply for an LEI if the main branch does not yet have one.
Individual jurisdictions determine whether they require an LEI to be held by entities operating within that jurisdiction. A detailed list which sets out the status of LEIs in a number of global jurisdictions is available here: https://www.gleif.org/en/about-lei/regulatory-use-of-the-lei . You will note that LEIs are now required by the Reserve Bank of India in certain circumstances. Mandatory LEI adoption is becoming increasingly common around the world and its use is expected to become more widespread into the future.