What is MICR Code ?
Online transactions have become quite common today and therefore banks have to ensure that they keep track of all the online transactions that happen across the country. With the explosion of internet and mobile devices more and more users across the country are using internet banking technologies that allow them to monitor their banking accounts online and at the same time make electronic fund transfers at a click of their mouse button or a tap on their smartphone devices. To make things convenient banks make use of various codes like IFSC and MICR codes that allow them to keep things under control.
MICR codes are usually printed on cheques and that makes the entire transaction quicker and easier for the banks. MICR also known as Magnetic Ink Character Recognition is not a code, but a technology that is used to print alphanumeric details on the cheque. This technology is used by the bank to facilitate the processing of cheques. MICR characters are printed in special typefaces using a magnetic ink or toner that can be read by special machines that banks use to validate and process cheques. The MICR code on the cheque can also be read by human eye and you can find them at the bottom strip of cheque leaf. The technology makes use of a special ink or toner that uses iron oxide and since banks have a special machine to read this code it speeds up the overall process of clearing and processing more cheques in a single day.
Importance of MICR Codes
MICR codes are important because they make it easier for the banks to know if the cheques are fake or not. MICR codes are printed using special ink and therefore they are easily recognizable in the special machines that banks have to identify the fake cheques from the real ones. This allows banks to be on the safe side as they can quickly identify a fake cheque and take things under control.
However, MICR codes are also given to bank branches and that makes it easier for the online banking customers to transact online using their computers and mobile devices. When the customers are using online transactions they can type in a unique MICR code that reveals the bank branch. This allows RBI to speed up the clearing process and ensure that the money is transferred from the right bank account to the right destination bank branch.
Clearing every cheque manually can take lot of time and slow down the overall process. It can also lead to human errors and that means more time wasted during the entire process. With MICR codes banks can speed up the process as they have the machines that can read the code and tell if the cheque is fake or real. This almost makes the process error-free and faster than manual clearance.
Since every bank branch has a unique MICR code, things also get speed up when the customers are using online methods. Online transactions can get streamlined when MICR codes are entered during the transaction process.
A regular MICR code has nine digits and they are further broken up into parts. The first three digits in the MICR code is the city code. This refers to the city in which the bank branch is located. The first three digits are usually in sync with the pin code of the postal addresses across the country. The next set of three digits is the bank code while the last three digits represent the bank branch code. Different banks and branches have different MICR codes and therefore it is important to evaluate the right MICR code before making any online transactions.