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#16 in the LEI Lightbulb Blog Series - Spotlight on India - Part II: Sustained Momentum for the LEI Charts a Path in the Fight Against Financial Crime

As LEI adoption across India continues to gather pace amid strong regulatory advocacy, a compelling precedent is emerging for global stakeholders as they take the fight to financial crime.

Author: Vikas Panwar

  • Date: 2024-03-21
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The growing adoption of the Legal Entity Identifier (LEI) has played a key role in fostering increased trust and transparency across the Indian financial ecosystem. This effort has been spearheaded by the Reserve Bank of India (RBI), which has proactively driven an advanced regulatory agenda over several years championing the LEI:

  • June 2017 - the LEI is mandated as a necessary requirement for all participants in over-the-counter (OTC) markets for Rupee interest rate derivatives, foreign currency derivatives, and credit derivatives in a phased manner (based on the net-worth 'slabs').
  • November 2017 - phase-wise introduction of the LEI for all large corporate borrowers of banks in India. Since the end of December 2019, this has meant entities without an LEI are not to be granted renewal or enhancement of credit facilities with exposure totaling ₹ 50 crore or more (As of February 2024, ₹ 50 crore is equivalent to approximately 6 million USD). A separate LEI roadmap for borrowers with exposure between ₹ 5 crore and ₹ 50 crore was released in April 2022. This means entities will need an LEI to be granted renewal or enhancement of credit facilities with exposure totaling ₹ 10 crore or more after 30 April 2024 and ₹ 5 crore or more after 30 April 2025. Corporate borrowers having aggregate fund-based and non-fund-based exposure of ₹ 5 crore and above from any bank/FI, including Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs), were also mandated to obtain LEI registration and capture the same in the Central Repository of Information on Large Credits (CRILC), with the aim of facilitating "assessment of aggregate borrowing by corporate groups and monitoring of the financial profile of an entity/group.
  • November 2018 - phase-wise introduction of the LEI for non-derivative markets, including government securities markets, money markets, and non-derivative forex markets.
  • January 2021 - the LEI is mandated in all payment transactions totaling over ₹ 50 crore undertaken by entities for Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT), with dedicated fields added to RTGS and NEFT payment messages to capture remitter and beneficiary LEI information.
  • December 2021 - the LEI is mandated in all cross-border transactions, such as capital or current account transactions of ₹ 50 crore and above.

The proactive stance of the RBI towards promoting LEI adoption has been supported and mirrored by other regulatory bodies. In October 2018, the Securities Exchange Board of India (SEBI) recommended Eligible Foreign Entities (EFEs) in the commodity derivates market provide a valid LEI to meet know-your-customer (KYC) requirements. This was followed in June 2020 by the Insurance Regulatory and Development Authority of India (IRDAI) mandating the LEI for all insurers and their corporate borrowers with transactions over ₹ 50 crore.

Regulatory momentum continued into 2023. In a move heralded by the RBI as an important measure to promote stability and resilience across the Indian financial system, SEBI mandated the LEI for issuers of listed non-convertible securities, securitized debt instruments, and security receipts to "enhance transparency and track the financial exposure of an entity, as LEI serves as a common identifier across all financial services." Furthermore, SEBI directed the depositories to map the LEI code of issuers to their existing or newly issued International Securities Identification Number (ISIN).

SEBI also mandated an active LEI for non-individual foreign portfolio investors (FPIs) "to improve the quality and accuracy of financial data systems for better risk management and to obtain a globally accepted identity number."

Promoting trust and transparency across the Indian economy

As a result, the LEI is now embedded within the very fabric of the Indian economy as a critical business enabler. Sustained demand is reflected by India being among the top five growth jurisdictions for LEI issuance, as reported by GLEIF in 2020, 2021, 2022, and 2023.

Growing adoption has been bolstered by the expansion of the LEI issuance ecosystem. In 2024, NSDL—one of the key Market Infrastructure Institutions (MII) in India and among the largest securities depositories in the world—became the second GLEIF-accredited LEI issuer in India. MNS Credit Management Group has also become the second Validation Agent operating in the region. This followed Rubix Data Sciences assuming the role in 2022, with both organizations working alongside Legal Entity Identifier India Ltd. (LEIL), a GLEIF-accredited LEI issuer and a wholly-owned subsidiary of the Clearing Corporation of India Ltd.

In addition to facilitating a simpler, faster, and more convenient LEI issuance process, Validation Agents are playing an integral part in engaging and educating legal entities on the opportunities afforded by wider adoption of the LEI across the Indian economy.

Take India's micro, small and medium-sized enterprises (MSMEs). Despite contributing up to 30% of GDP, their full economic potential has traditionally been inhibited and constrained by an inability to prove and verify their identity—particularly across borders. By providing robust business credentials, the LEI can expand MSME access to trade finance and open new opportunities across domestic and global markets.

There are also broader lessons for the international community. India has been a standard-bearer for proactively promoting the transformative potential of the LEI, offering a compelling precedent for other jurisdictions across myriad use cases. Particularly pertinent is the ongoing fight against global financial crime, where India's successes offer a blueprint for jurisdictions around the world.

Learning from India in the fight against financial crime

The RBI's 'Payments Vision 2025' — published In June 2022 — clearly articulates the LEI's role in enabling secure, convenient, and accessible payments. When detailing the ambition to broaden the scope, usage, and relevance of the LEI in all payment activities, the RBI explains that "encouraging the use of the LEI facilitates faster tracking of payments, unique identification of parties involved, ensures greater precision and transparency and helps in the adoption of a single identity for an entity across multiple applications."

As these capabilities are unique, the RBI's Payments Vision 2025 recognizes the LEI's ability to enable faster, cheaper, more transparent, and inclusive cross-border transactions to support the G20 roadmap for enhancing cross-border payments. The capability to support key cross-border use cases, such as sanctions and watch-list screening, KYC and client onboarding, fraud detection, and the fight against vendor scams, e-invoice reconciliation, and account-to-account validation, is also noted.

Importantly, the RBI's early advocacy for the LEI is now echoed by key global stakeholders supporting the inclusion of the LEI within ISO 20022 payment messages. These include the Bank for International Settlements' Committee on Payments and Market Infrastructures (CPMI), The Wolfsberg Group, and the Swift Payment Market Practice Group (PMPG).

Given growing industry recognition of the foundational role that the LEI can play to increase trust and transparency in cross-border payments, India’s long chorus of support clearly demonstrates the potential to take the fight against global financial crime by driving forward LEI adoption.

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About the author:

Vikas Panwar currently represents the Global Legal Entity Identifier Foundation (GLEIF) in the capacity of Country Business Manager for India. Prior to working with GLEIF, Mr. Panwar worked at the National Stock Exchange of India Ltd. (NSE), Delhi office in India. He worked in multiple departments in a span of fourteen years in his last stint. As the Team Lead (Senior Manager), he managed the Northern region for the Mutual Fund vertical. Mr. Panwar holds an MBA from Ramaiah Institute of Management (MSRIM), Bengaluru.

Tags for this article:
Data Management, Global LEI Index, Global Legal Entity Identifier Foundation (GLEIF), Regulation, Validation Agents