RBI Mandates LEI and UTI for Financial Market Transactions to Boost Transparency
LEI to Be Mandatory for OTC Market Participants
Mumbai, March 27: The Reserve Bank of India on Friday directed the mandatory use of Legal Entity Identifier (LEI) for participants in financial market transactions, aiming to enhance transparency and standardisation across markets.The LEI is a 20-character alphanumeric code that uniquely identifies entities involved in financial transactions. According to the central bank, the requirement will apply to all over-the-counter transactions undertaken by entities other than individuals across government securities, money market instruments, foreign exchange instruments, and derivatives.
However, for non-derivative foreign exchange transactions, the LEI mandate will apply only where the transaction value is equivalent to or exceeds USD 1 million or its equivalent in other currencies.
UTI Requirement for OTC Derivative Transactions
In addition to LEI, the RBI has introduced the requirement for a Unique Transaction Identifier (UTI) for transactions in the OTC derivatives market.The UTI is a unique code assigned to each OTC derivative transaction and must be generated or reported in line with existing governing directions. This requirement will apply to all eligible derivative transactions executed on or after the effective date of the new framework.
Global Standards to Guide UTI Structure
The central bank stated that UTIs must be generated in accordance with the technical guidance issued by the Committee on Payments and Market Infrastructures and the International Organisation of Securities Commissions in February 2017.Each UTI will have a maximum length of 52 characters. It will include the LEI of the entity generating the identifier, followed by a unique transaction-specific code, ensuring traceability throughout the lifecycle of the derivative contract.
Implementation Timeline
The RBI clarified that the LEI-related directions will come into force with immediate effect. Meanwhile, the UTI framework will be implemented from January 1, 2027.The move is intended to align Indian financial market practices with global standards, while improving transaction-level transparency and monitoring.
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