IFSC stands for Indian Financial System Code. This is an individual code assigned to banks in India that participate in the 2 main fund transfer systems: the RTGS (Real Time Gross Settlement) and the NEFT (National Electronic Fund Transfer). The purpose of the IFSC is to give unique identification codes to all member banks.
The code has 11 digits. The first 4 digits represent the bank and by alphabet characters. The last 6 digits are for the identification of the branch. The 5th character is a "zero", which is intended for future use.
The IFSC is issued by Reserve Bank of India (RBI), which is the country's central banking institution. The bank is fully owned by the national government and has full authority and control over all banks. It monitors and implements the monetary policies of India, manages the banking and financial systems, has jurisdiction over foreign exchange and the FOREX market in the country and many other functions.
You can easily get the IFSC code from your bank branch. It is also normally printed on the cheque book, so if you want to find the code of your bank branch, you can just look at your cheque leaf. You can also go to www.rbi.or.in, the website of India's central bank. There are 4 steps to follow to find the IFSC code, including the bank details such as the location.
The first step is to select your bank, for example, The State Bank of India. Second, you select your state; and third, your district. The fourth step is to select your branch name. This process will give you the IFSC code and the MICR (Magnetic Ink Character Recognition), which is used in printing alpha-numeric details on checks. You will also find the address and the phone number of your bank branch after you've completed the 4 steps.
As mentioned above, The Reserve Bank of India supports two main fund settlement systems, the RTGS and NEFT.
What Is IFSC RTGS Transfer?
RTGS is a system of transferring funds between banks on a gross settlement basis. It means that the fund transfer is done on the basis of instruction by instruction or individual instructions. The transfer is also a real time transaction; the fund transfer process is done as soon as the instructions are received and need not wait for a later date.
RTGS is also designed for transactions that involve large volumes, with allowable transfer amount of Rs 200,000 minimum, but no maximum limit amount. You, as the beneficiary, will not need a long time to wait for the funds to be transferred to your account. You will receive notification from the RBI as soon as the funds have been transferred.
As additional information, not all bank branches are RTGS-enabled. Before making any transaction, you should make sure that your bank branch is member of the Real Time Gross Settlement system.
How Is the IFSC RTGS Fund Transfer Processed?
The structure used in this scheme is as follows.
- Payment instructions will be sent by the remitting bank to the technical operator of the central processor.
- The message is acknowledged by the central processor, who will send the original message, including a set of instructions to RBI, the central bank. The instructions should include the following: amount to be transferred, IFSC code, the issuing and receiving banks.
- The RBI debits the account of the remitting bank and credits the account of the beneficiary bank. Upon the completion of this transaction, a confirmation will be sent to the central processor.
- The central processor then sends message to the receiving bank with proper beneficiary details.
The above structure is defined as the Y-shaped structure. This is one of the 4 flow structures allowed by the RBI. The other 3 are the V, L and flow structures.
There is no processing or service fee charged for inward transactions. For outward transactions, however, a processing fee of Rs. 25 will be charged for transfers from 2 to 5 lakhs; and Rs 50 for transfers that exceed 5 lakhs. One lakh is equivalent to 100,000 Indian Rupees.
There are benefits to be gained by using the RTGS fund transfer system. All transactions are done in real time. The credit and liquidity risks are eliminated by this settlement system, as the beneficiary account will instantly receive the transferred amount the moment the request or instruction is accepted by the central bank. The payments made are final and irrevocable because settlement system takes place in the books of the central bank.
RTGS fund transfer system now covers over 800 Indian cities and towns. It started only with 4 banks in March 2004 and now has 508 clearing center about 14,000 branches and 109 member banks.
The NEFT (National Electronic Fund Transfer)
This is the other system of funds transfer allowed by the RBI, where an individual or a corporation can transfer funds electronically. There is no minimum amount required to make the transfer, unlike the RTGS.
The payment under this system is completed in specific hourly batches. There are 12 settlements on weekdays, from 9am to 7pm and 6 settlements on Saturdays from 8am to 1pm. If your transaction falls after a designated settlement time, it would be processed in the next settlement period, in contrast to the RTGS system, where transactions are continuously processed throughout the business hours of the system.
About 3 hours after the remitting account has given a request for transaction, the payment will be sent to the RBI. The length of time to complete a NEFT transaction depends on how quickly a beneficiary bank can complete the processing of funds. The process involves filling out of an application form that includes details on beneficiary account, such as account name, account number, account type, maximum amount to be settled and IFSC code of bank branch.
The form is available at all bank branches and you can make the fund transfers availing the facilities of internet banking and mobile banking. ATMs can also be used, as offered by some banks. You can authorize your bank branch to make a settlement in a specified amount to a beneficiary account. A funds transfer message will be sent to NEFT service center, who in turn will forward this message to the RBI-controlled NEFT clearing center.
The remitting bank's account will be debited and the beneficiary bank will be credited with the amount transferred and confirmation of settlement will be received at the destination bank.
The NEFT settlement system also offers some benefits. It is environment friendly, as it minimizes paper-work. The process of transferring funds from one bank to the other is seamless, no hassle and the transfer fee is cheaper compared to Pay Order or Demand Draft. It is also risk-free, just like the RTGS.
If the settlement is delayed or there's no credit in your account, you can inquire with your bank branch. If this problem is still not satisfactorily addressed, you may file a complaint with the Customer Services Department of the RBI through email. You can also do the filing of complaint in person by going to the RBI office at 1st floor, Amar Building, Fort Mumbai 400001
What Is MICR Code? MICR stands for Magnetic Ink Character Recognition. These are the bar codes that you would normally find at the bottom of your cheque leaves. MICR codes, technically, refer to the process of printing the codes on the cheque leaves.
Of all the countries in the world, India is among those, whose economy is growing the fastest. It is highly because its banking system is very well developed and has been in practice for many years now. It was in the year 1980 when new methods of effective and safe payment systems were introduced by the Reserve Bank of India (RBI), the central bank of the country. These methods included, among others, the introduction of IFSC (Indian Financial System Codes) and the MICR codes.
What Is The Composition of the MICR Code?
The MICR code is designed to make cheque clearing easy and quick. There are nine digits in this code, divided into 3. Each of these groups of 3 digits tells us something about the bank. It goes like this: the first 3 digits refer to the code of the city where the bank branch is situated. It usually is the first 3 numbers of the PIN codes of India's city addresses. The middle 3 digits are for the code of the bank where you have your account and the last 3 is the code of your bank branch.
Therefore, if you are a depositor or client of the State Bank of India located in Mumbai, the MICR code will be as follows:
400 city code for Mumbai
002 State Bank of India code
009 Andheri bank branch code
The MICR codes will appear on your cheque leaf as 400002009.
The code does not include your bank account number. As shown above, only the city code, the bank code and the code of the bank branch are included. The account number is printed out separately on your cheque book. Cheques are negotiable instruments that you issued to an individual or entity as forms of payment.
You can go and visit the RBI website, www.rbi.org.in if you want to find out the MICR codes of the different Indian banks, including their branches.
It was said previously that the MICR can help in speeding up cheque processing. Under this system, a cheque will be inserted into a reading machine. This device can also be a cheque sorting machine and it will read through and be able to identify the bank branch that issued the cheque book. The automated clearing process will therefore be activated once the identification has been done.
The machine can certainly read the clear and fine MICR codes even if there are other markings or stampings on it and even if it has been mutilated.
All bank branches is India have been issued MICR codes by the RBI. The central bank also hopes to eliminate clearing processes that are paper-based. The MICR Cheque Processing Centers that the government bank is planning to introduce is expected to process more than 90 per cent of value and volume of cheques in India that need to get cleared.
The characters of the MICR code are printed with a magnetic ink that contains iron oxide. The printing is done on special typefaces. The technology is used by India's banking industry to speed up cheque processing. While a special machine is used by the banks to read the MICR code and unlike other technologies such as bar codes, it can be read easily also by humans. These 9 characters are used by RBI in order to identify the bank branch that issued the cheque to be processed.
Before the MICR codes were introduced, the processing of cheques was manually done. This method was of course a significant addition to the cost of the bank operations, so when noticeable increase in cheque processing was seen, bankers sought ways to automate the process. Financial institutions also developed standards, so that uniformity is ensured in the implementations.
MICR codes offer many benefits that include the following.
Prevents Fraud : With MICR code, you can easily spot a fake demand draft once you insert it into the machine and it turns out to be unreadable by the device. If it lacks the magnetic ink that is used by MICR it cannot be read. The ink is not easily accessible by the public, making it difficult for bad elements to create cheques, which are phony.
Speed: With MICR code, large banking institutions can process cheque in hundreds or thousands per day. Before this system was introduced, the information was entered into the computer manually. This task alone can take up most of the teller's time, resulting in higher labor costs for the bank.
Accuracy : If the cheques to be cleared had to be processed manually, this cannot be always accurate due to human error. The bank employees could input incorrect information into the computer. When MICR is used on cheques, the error rate, if any, is very minimal. The consumers, therefore and the banks also are protected from erroneous transfer of funds.
Standardization : All cheques have the same information, all standardized, that include the codes of the bank and the place where the bank branch is located. All the cheques use the same font, enabling the bank to read the cheques easily, so that the processing of the cheque is done easily, without any hassles. In India, the RNI determines the standard for printing MICR cheques.
Because of the large volume of monetary transactions in India, it has become mandatory for banks and other financial institutions to verify cheques and accounts prior to processing. This is where the codes come in handy and along with the MICR codes, the IFSC (Indian Financial System Code) also has a role to play in this task.
SWIFT Code : Banks are given unique identification codes. It's a technique to identify banks. These codes are used when individuals transfer money between banks, especially in the case of international wire transfer.
There are 8 or 11 characters in a SWIFT code. An 8-digit one refers to the primary office.
Starting 4 characters - Only letters of the bank branch
The next 2 characters - ISO 3166-1 only letters of the alpha-2 country code
Next 2 - Location code
Next 3 - Branch code (optional)
At present 7,500 SWIFT codes are live. These are for active participants, who are partners of the SWIFT system. Over and above this, there are 10,000 more codes, these come handy in case of manual transactions. It is meant for passive participants.
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication and its headquartered in La Hulpe, Belgium. It is an identification code, which is unique and can be used by financial as well as non-financial organizations. SWIFT code complies with the ISO 9362 standards. These codes are also used to exchange messages between banks.
Use of SWIFT codes
There are many banks in the world, what if there are 2 banks with same name in 2 different corners of the world, SWIFT helps to resolve this problem and hence is very helpful in international transactions. Hence any company which deals with business all over the world needs to have a SWIFT code. You can search through 129,667 IFSC Codes of 173 Banks in India! We are making earnest efforts in keeping the information updated by adding IFSC codes of banks as they get available on RBI website.