Importance of IFSC code and MICR code

The Indian banking system has constantly evolved over the last decade embracing new technological advancements and systems. From being a totally manual working mechanism, the Indian banking sector has become fully computerized with semi rural and rural branches connected to the mainstream by a central network. 

Indian Financial System Code (IFSC) and Magnetic Ink Character Recognition code also known as MICR code are two of the prime examples of technological up gradations in the banking and finance sector in recent times. While IFSC or Indian Financial System Codes are unique for each bank branch useful in branch identification in online financial transactions, MICR codes are important for quick cheque clearance mechanism. 

MICR code is printed in the cheque leaf readable only by the cheque clearance house. This facility allows the clearing house to clear all domestic, outstation and foreign cheques in real time.

Significance of IFSC Code:

All online banking transactions including net banking, online purchases, NEFT and RTGS online payment transfers are all possible due to IFSC codes. Indian financial system code of IFSC as it is commonly known is a set of 11 special characters including numbers and alphabets. 

• The first 4 characters of the code correspond to the bank concerned and are always alphabetic. 
• The last six characters of the code correspond to the exact bank branch and can be numeric or alphabetic or a combination of both. 
• The fifth character from the front is reserved by the regulator Reserve Bank of India and reserved for future use. 
• As of now the fifth character in IFSC code is always 0.

Example of IFSC Code:

Let us consider the IFSC code for Citibank Bank Andheri branch in Mumbai city. 

• The IFSC code for the bank is CITI0000036. 
• First 4 characters are CITI representing the name of the bank which is Citibank India in this case. 
• The last six characters are 000036 which correspond to the Andheri Branch of Citibank India in Mumbai. 
• The fifth character from the front is o and reserved for future use. 

Likewise let us consider the IFSC code for Andhra Bank located in Achanta in the Western Godavari district of Andhra Pradesh. 

• The IFSC code for the bank is ANDB0000001. 
• First 4 characters are ANDB representing Andhra Bank, the name of the bank in this case. 
• The last six characters are 000001 which corresponds to the Achanta city Branch located in the Western Godavari district of Andhra Pradesh. 
• The fifth character like in all IFSC codes is 0.

Significance of MICR Code:

MagneticInk Character Recognition Code better known as MICR code is a 9 character code which is used in cheque clearance leading to faster processing and settlement of funds. MICR codes are printed in each cheque leaf of the bank but are invisible to the naked eye. A special ink is used to print the MICR code which is readable only by the code reader in cheque clearing houses. 

• The special ink makes MICR codes tamper proof and difficult to copy. 
• MICR codes consist of a nine digit numeric code. 
• The first three digits correspond to the city codes which are usually same as the pin code of the city. 
• The next three characters represent the bank code. 
• And the last three are reserved for the concerned bank branch.