Reserve Bank of India Rules

Objectives and scope

Stated RBI objectives are centred around:

• Create a consistent organisation identifier across transactions and reports.
• Reduce counterparty ambiguity in payments and forex flows.
• Strengthen market discipline and data integrity across RBI-regulated markets and supervised entities.

Key RBI requirements that firms should know:

• Domestic large value payments. Entities that are not individuals must include remitter and beneficiary LEI in NEFT or RTGS payment messages for transactions of ₹50 crore and above. Government departments are exempt, but government corporations and undertakings are in scope.
• Cross-border transactions. Authorised Dealer Category I banks must capture a valid LEI for resident non-individuals on cross-border transactions of ₹50 crore and above from 1 October 2022. Once an entity has an LEI recorded, banks should report it on all future cross-border transactions for that entity, regardless of value.
• Market participation. RBI requires LEIs for entities in non-derivative markets such as government securities, money markets and forex. Lapsed LEIs are deemed invalid for these markets.
• Borrowers of banks. In line with RBI borrower circulars, banks and financial institutions must ensure borrowers above specified total exposure thresholds obtain an LEI. Borrowers that do not obtain an LEI are not to be sanctioned new exposure or renewal or enhancement of existing exposure.

Borrower identification and credit exposure reporting

The Reserve Bank of India (RBI) has made it mandatory for borrowers above defined exposure thresholds to obtain a Legal Entity Identifier (LEI). This initiative ensures that banks, financial institutions, and regulators can consistently identify borrowers across systems and exposures, supporting better credit risk aggregation and supervisory insight.

Circular reference:
RBI/2017-18/82, “Legal Entity Identifier for Large Corporate Borrowers” (2 November 2017), subsequently expanded through notifications in 2020 and 2021 to include non-banking financial companies (NBFCs) and authorised financial institutions (AIFIs).

Scope and thresholds:

• Initial phase: Borrowers with total fund and non-fund exposure of ₹1,000 crore and above were required to obtain an LEI by 31 March 2018.
• Subsequent phases: The requirement was extended in stages down to borrowers with exposures of ₹5 crore and above by 30 April 2023, as detailed in RBI circulars to Scheduled Commercial Banks, Urban Co-operative Banks, and NBFCs.

The exposure definition includes all fund-based and non-fund-based credit exposures aggregated across banks and financial institutions at the group level.

Compliance enforcement:

• Borrowers without a valid LEI are not eligible for sanction, renewal, or enhancement of credit facilities once their applicable deadline has passed.
• Banks and financial institutions must record the borrower’s LEI in the Central Repository of Information on Large Credits (CRILC) and in their internal credit systems.
• LEI status must be kept current—lapsed LEIs are considered non-compliant for credit exposure purposes.

Rationale:

• The RBI’s borrower requirement improves transparency in India’s credit markets by enabling:
• Accurate aggregation of borrower exposures across multiple lenders.
• Stronger monitoring of systemic risk and connected lending.
• Simplified integration of borrower data with global reporting standards (e.g., Basel, IFRS, ISO 20022).

In practice: Financial institutions in India are expected to build LEI verification into loan origination and renewal processes, cross-reference LEIs against GLEIF data, and ensure automated renewal to maintain validity.