What is IFSC Code?
In the IFSC Code, IFSC stands for Indian Financial System Code. Reserve Bank of India assigns IFSC Code to each bank branch. It is an 11 digit alphanumeric code which is used for transferring money between the banks within India. In the 11 digits alphanumeric code, the first four digits are alphabets which represents the name of the bank. The fifth digit is always zero and the next six numeric digits represent the bank branch. Within the country, every bank branch has a unique IFSC Code which can be seen either in your bank passbook or in the chequebook.
It is a high probability that you must be using an app for online payments. It may be Google Pay, PhonePe, BHIM or any other app, or maybe you are using online banking. Generally, IFSC Code is required for transferring money from one bank account to another bank account. In addition to providing the account number of the recipient, banks ask us for the IFSC Code of the recipient. An IFSC Code helps a bank to ensure the credibility of a transaction. The use of IFSC Code eliminates the chances of error in the transaction.
What happens when bank branches are merged?
Each bank branch has its unique IFSC code. This alpha-numeric code is used as an identifier for a transaction, along with an account number. While an individual’s account number does not change when bank branches are merged, IFSC codes of the merged branch cease to exist after some time. In that case, the customers have to use the IFSC code of the new branch where the older branch has got merged. The bank typically communicates this to its customers.
What is MICR Code?
MICR stands for Magnetic Ink Character Recognition. It a nine-digit numeric code which is generally found on the cheque. The first three digits of the MICR Code represents the city, the middle three represents the bank and the last three digits represent the branch. MICR Code is used for the secure transaction of cheques and its importance is at par with the IFSC Code.
MICR Code is a product of highly advanced Character Recognition Technology which is used by banks for cheque clearances. You can easily find out the MICR Code at the bottom of a cheque as highlighted in the above picture.
How does MICR help speed up the processing of cheques?
The manual clearing system of cheques where there is a possibility of human errors sometimes results in delaying cheque clearance. While the MICR code which is printed on the cheque with a unique magnetic ink (usually iron oxide) has magnetic material present in it. Thus, it makes it machine-readable and decreases the probability of error to almost zero.
In this method, the reading machine or a cheque sorting machine reads through a cheque when inserted and identifies the branch to which the cheque belongs and activates the automatic clearing process. The use of MICR Code makes the cheque clearing process so convenient that the machine could read it even if the MICR code isn’t visible due to other marks or stamps on it.