Everything You Need to Know About IFSC Code

With net banking taking the industry by storm, all the banks have beefed up the security and accuracy of conducting such transactions. You can easily send money from any part of the world to your loved ones, and for that, you just need to know the IFSC code of the bank you are transferring funds to.

The full form of IFSC is ‘Indian Financial System Code’. It is an 11 digit alpha-numeric code printed on cheques and other bank materials.

It is used to exclusively identify all bank branches that come under the NEFT network created by the Reserve Bank of India. The IFSC code helps to send money using RTGS, IMPS, or NEFT method.

The first four digits of the IFSC code helps in identifying the bank and the last six characters tell you about the branch. The 5th character is zero, which is reserved for future purposes. This code plays a vital role in simplifying the challenges that one can face while transferring money to the beneficiary’s account.  

Every bank branch and location has its own IFSC code that helps the customers in making electronic transfers of funds and ensures that your money goes into the right account.

E.g Indian bank IFSC code for Karol Bagh branch in Delhi is IDIB000K023

South Indian Bank IFSC code for Karol Bagh branch Delhi is SIBL0000117

Earlier, IFSC codes were given by the Reserve Bank of India to identify unique branches involved in the NEFT system. However, they are now used by other electronic money transfer system applications like RTGS and IMPS.

It is really easy to find the IFSC codes of most of the Indian banks on the internet. However, you must know that the RBI keeps changing the unique identification characters of the banks.

If you have got the code from a third party, it becomes really necessary to contact the bank branch and confirm the identification numbers. If you have got a wrong code, your transaction can get canceled.

Here’s how IFSC codes help in RTGS and NEFT transfers.

How Does the IFSC Code Assist in RTGS Transactions?

Real-time gross settlement (RTGS) is a specialized fund transfer method where the money is transferred on a "real-time" basis between the banks. There is a continuous and real-time settlement of fund-transfers. It is generally used for high-value transactions of minimum Rs 2 lakh that require instant clearing.

These transactions work in a specific way:

At first, the central processor receives the instructions regarding the payment from the remitting bank. It then breaks down the message into different components like what amount is to be transferred, what is the IFSC code, and which are the receiving and issuing banks. The central bank then clears the amount and sends it to the receiving bank by deducting it from the bank that issued the RTGS.

A message is also sent to the receiving bank to inform the receiver about the successful completion of the transaction. However, RTGS transactions have charges that depend on the amount that is being transferred.

How Does the IFSC Assist with NEFT Transactions?

National Electronic Funds Transfer (NEFT) is a payment system that helps in one-to-one funds transfer. Through this system, individuals, firms, and corporates can easily send money from any bank branch to any individual, firm, or corporate having an account in a different bank electronically. It is generally used for small transactions, which are less than Rs 2 lakh.

To begin with, any individual or firm has to fill a form, where they have to add the details of the beneficiary, like the IFSC code, the name of the beneficiary, the account number, type of account, and finally the amount to be transferred.

After that, a message is sent by the remitting bank then to the NEFT center, which eventually processes it and sends it to the clearing center controlled by RBI.

The clearing center uses the IFSC code to approve the transfers, which finally reaches the beneficiary. NEFT transactions also levy certain charges.

Having an IFSC code has its benefits too. Some of them are as follows:

Simplifies Internet Banking

Online banking has become a lot more convenient than traditional forms of banking. It saves you from standing in long queues and waiting to complete the formalities. With the help of IFSC code, online transactions are completed within a few minutes, thereby saving a lot of time.

Encourages Paperless Banking

Another important aspect of IFSC code is that it promotes paperless banking, thus, contributing to environment-friendly banking. Business transactions have become quick, simple, and paperless, thanks to these IFSC codes.

Fast Money Transfer

There was a time where even smallest of the transactions used to take a lot of time to complete because of the long and tiring banking process that required you to be present in-person to complete all the formalities. However, now, with the help of IFSC codes, the fund can be transferred quickly and seamlessly across the globe. This proves to be of great help at the time of emergency when transactions have to be done instantly.

Protects Against Frauds

IFSC Codes have made online banking safe and secure. The unique codes provided to banks and its branches ensure secured transactions, therefore minimizing the chances of fraud or theft. Any security breach is impossible with IFSC codes.

Instant Communication

IFSC Code helps in maintaining clear and quick communication between the sender and the receiver. Whenever an online transaction is done an instant SMS, or an e-mail is sent to both the parties from the concerned banks.

Assists Banks Invalidation and Settlement

Another amazing benefit of IFSC Codes is that it helps invalidation and settlement among various banks across the country. If the banks don’t have an IFSC code, they can be at a huge risk while remitting funds for the customers. So, if the customers are curious about knowing the IFSC code of a particular bank branch, the bank must tell them about how IFSC code for the safe completion of any bank transaction.

On the other hand, these codes are also of great help in meeting the requirements of individuals as well as corporate clients. Government organizations also use IFSC codes for decimating funds and clearing salaries of their employees.

You can also easily pay your bills, check your balance, and transfer money with the help of the Indian Financial System Codes.

Summing It Up!

On the whole, since IFSC Code was introduced, banking has become simpler across India. IFSC codes play a crucial role in electronic fund transfers. Its main purpose is to make internet banking accurate and secure.

Over some time, IFSC Codes have become a trustworthy way of transferring funds owing to its great security. It plays a vital role in monitoring, identifying, routing, and authenticating that the transactions are perfectly accurate.

But sometimes things may go wrong with IFSC code if it is incorrect. That’s why one has to be careful while filling up the IFSC code of a particular bank branch.

The smallest error can lead to money getting credited in someone else’s account. So, be aware!