When Is an LEI Number Required?

An LEI (Legal Entity Identifier) is required when a legal entity participates in regulated financial transactions. It is mainly used to improve transparency, track financial transactions, and reduce financial risk in the banking and capital markets system.

An LEI is mandatory only for certain types of transactions and entities — not for every business.

What Is an LEI?

An LEI is a 20-character unique identification number issued to legal entities that engage in financial transactions.

The global LEI system is managed by the Global Legal Entity Identifier Foundation (GLEIF).

It helps regulators and financial institutions identify companies involved in large or complex financial dealings.

When Is LEI Required in India?

In India, LEI requirements are issued by:

Reserve Bank of India (RBI)

Securities and Exchange Board of India (SEBI)

Below are the main situations where LEI is mandatory:

1️⃣ For Bank Loans Above ₹5 Crore

LEI is mandatory for entities having:

Total bank exposure of ₹5 crore or more
(including fund-based and non-fund-based limits)

This applies to:

Private Limited Companies,Public Limited Companies,LLPs,Partnership Firms,Trusts,Other legal entities

Without an LEI:

Banks may refuse new loans

*Renewal of credit facilities may be denied

*Enhancement of limits may not be approved

2️⃣ For Derivative Transactions

If an entity enters into:

Interest rate derivatives

Currency derivatives

OTC derivative contracts

An LEI is mandatory for regulatory reporting.

Financial institutions cannot process derivative contracts without a valid LEI.

3️⃣ For Capital Market Transactions

LEI is required for certain entities participating in:

Corporate bond markets

Debenture issuance

Large securities transactions

Institutional investments

SEBI mandates LEI for specific market participants to ensure transparency.

4️⃣ For Large Corporate Borrowers

Companies classified as Large Corporate Borrowers must obtain an LEI for:

Raising funds through bonds

Issuing debt securities

Large structured financial transactions

5️⃣ For Cross-Border Financial Transactions

LEI may be required when:

Participating in international financial markets

Entering global derivative contracts

Engaging in cross-border securities transactions

Since LEI is globally recognized, it is often mandatory in international finance.

When Is LEI NOT Required?

LEI is generally NOT required for:

✔Small businesses with no large bank loans

✔GST registration

✔Income tax filing

✔Udyam registration

✔Basic company incorporation

✔Normal day-to-day business transactions

✔Individuals (unless acting as legal entities in regulated markets)

✔Simple Understanding

You need an LEI if your business:

✔ Has bank exposure of ₹5 crore or more
✔ Deals in derivatives
✔ Issues corporate bonds
✔ Participates in regulated financial markets
✔ Is required by RBI or SEBI

If none of the above apply, LEI may not be mandatory for your business.

Important Points

LEI is valid for 1 year

It must be renewed annually

If not renewed, status becomes LAPSED

A lapsed LEI may block financial transactions

Final Summary : An LEI number is required mainly for large financial transactions and regulatory compliance. It improves financial transparency and helps regulators monitor systemic risk.

For small businesses not involved in large loans or financial market activities, LEI is usually not compulsory.

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