What is IFSC?
IFSC is the acronym used for Indian Financial System Code. This is an 11-digit alphanumeric code used in the Indian banking system which ensures smooth electronic funds transfer in India. The IFSC is a distinctive code that combines the ‘bank code’ and the ‘branch code’. Thus, we can say that it functions as an identification code for the banks and their respective branches and considering the fact that all the banks these days facilitate the electronic funds transfer and involve the use of ‘payment & settlement systems’, all of them are allotted this ‘IFS Code’ by the Reserve Bank of India. Whenever an online transaction needs to be initiated, it will not be possible without an authentic IFSC of the respective bank branch.
Pattern of IFSC – Indian Financial System Code
The IFSC is an 11- digit alphanumeric code, which means that it consists of both ‘numbers’ and ‘alphabets’ which makes it a unique combination. The first four characters represent the bank name followed by a zero (0) and the last six characters which generally are numeric represent the branch of that particular bank.
E.g. An IFS Code for State Bank of India would look something like this: SBIN0005475
How / Where to find IFSC?
Any customer who needs to initiate an online funds transfer, or wants to transfer money to some other bank or to the same bank, he/she will need as IFS Code to make that possible. Where and how can you find an IFSC?
- The IFS Code appears on the cheque books and account passbooks of all the account holders.
- As the RBI allotts IFSC to various banks and branches, you can find the IFS Code on RBI’s website also.
- You can also find the IFS Code from any particular bank’s website.
- You may find some IFSC locators on various online platforms where you need to select the particular bank and the code will appear.
How does an IFSC work?
The IFSC or Indian Financial System Code is a code with a distinct combination which represents the bank and its respective branches. The bank code stays the same whereas the branches can be identified by their unique branch code, which forms the complete IFS Code. That’s how the online system/platform identifies the bank/s from/to which you need to make any online transaction and facilitates the online payment. These payments and transfers are usually done through online payment and settlement systems like NEFT (National Electronic Funds Transfer), RTGS (Real-Time Gross Settlement) and IMPS (Immediate Payment Service). A valid code is required to make that payment happen.
- The customer / payer enters the online platform.
- He/she enters the bank details – bank , branch name, account number and the IFS Code of the payee.
- The code is identified and then used by the NEFT & RTGS Systems.
- These online payment systems use that IFS Code to direct the transaction messages or information to the destination bank/ branch.
Importance of IFSC
IFSC or Indian Financial System Code finds its place in all online transactions or electronic funds transfer. It forms the basis of all financial activities in the Indian banking system. IFSC is important due to the following reasons:
- Makes the process of online money transfers smooth and easy.
- Prevents online fraud by adding an extra layer of protection in the online transactions. The code is unique to every bank and thus reduces the chances of online theft.
- Facilitates comfortable payments by saving customer’s time and eliminates the need to go to a bank branch.
- Reduces paperwork of any bank which facilitates online funds transfers.
- Ensures immediate information is sent through an SMS to the payer and the beneficiary / payee as soon as a debit or credit takes place.
IFSC makes net banking easy and smooth. It helps in identifying any bank or branch and facilitates the payments in a safe, swift and secure manner. Till now, around 130,000 IFS Codes have been allotted by RBI to different banks and branches. Payments banks are also included in this list of these banks. IFSC ensures the funds are transferred from the right person to the right one.
Apart from IFSC, there is another code that is relevant in Indian banking called MICR. MICR stands for Magnetic Ink Character Recognition. It is a 9-digit code that identifies bank branches that participate in Electronic Clearing System. It was established by RBI to make NEFT smooth. It indicates the serial number of a cheque. The first three digits in the MICR code represents the city, followed by the next three that represent the bank and the last three represent the branch. An MICR code is written with a special magnetic ink and printed on the bottom of the cheque,next to the cheque number and the magnetic ink can be scanned through a magnetic scanner and thus facilitates quick cheque clearance along with checking on the fraud cases.
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