Legal Entity Identifier
Also called: LEI · Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
A Legal Entity Identifier (LEI) is a unique 20-character code that identifies a party to a financial transaction anywhere in the world. It gives each company one global ID. This lets regulators see who owes what to whom across banks and markets, which helps them spot risk and fraud. In India, an LEI is mandatory for large borrowers and market participants.
Example
A large company that borrows from several banks must get an LEI. Its loans at every bank are then linked to one code. This lets RBI see the company's total borrowing in one place.
Don't confuse with
- PAN: this is an Indian tax identification number issued by the Income Tax Department and used within India. An LEI is a global code for identifying parties in financial transactions.
Related concepts
- Letter of undertaking
- Know Your Customer
- Ponzi scheme
- Chit fund
- Subprime lending
- Systemic risk
- Stress test