What is an IFSC Code and How Does It Benefit?

In banking terms, the acronym IFSC stands for Indian Financial System Code and is an alphanumeric code used to denote a bank as well as its branch. The IFS code is generally used for transactional purposes, especially in the case of online fund transfer using NEFT or RTGS or even the IMPS methods. The first four characters of this unique code represent the name of the bank, and the last six characters represent the branch. The fifth character of this alphanumeric code is always 'Zero' and is reserved for use in the future.

How Does the IFS Code Help in the Indian Banking System?

As mentioned earlier, the IFS code helps in transferring funds from one bank account to the other. IFS codes also help to locate banks and their respective branches across the country. For example, an SBI IFSC code can help to locate a State Bank in any city or place in India. Some ways in which the IFS code may help a customer or a bank executive are given below.

It Helps to Transact Online and for Internet Banking Purposes

Online banking or Internet banking is one of the quickest and easiest forms of banking. In modern times, various banks throughout the country have acquainted themselves with the Internet and provide plenty of online banking facilities to their customers. Moreover, customers also prefer online or internet banking to other, traditional forms of banking simply because it saves time and is also safer. For example, an electronic fund transfer is not only faster but also safer than many traditional forms of transferring money to another bank account.

The IFS code plays a vital role in Electronic Fund Transfer and online banking. When transferring funds online, customers will have to key in many details among which the IFS code is one of the most prominent. The IFS code ensures a smooth transaction by forwarding the details of the bank as well as the branch to which the sum of money must be credited. For instance, when transferring funds to an SBI account, an SBI IFSC code is required to complete the transaction.

It Facilitates Quick Fund Transfer

The IFS code of a bank is unique to that bank as well as its branch and provides a seamless experience when transferring funds. Thanks to the IFS code, people no longer have to stand in those long queues, waiting to deposit money into their bank accounts. The IFS code helps to complete transactions in a faster and safer way from anywhere in the world. This comes as a big relief for those who want to transfer funds on an emergency basis as the IFS code enables them to complete the transaction in just a few seconds.

It Reduces Fraud

IFSC codes are immensely secure and therefore enable safer transactions. The code is unique not only to each bank but each of the branches of a bank. This reduces the likelihood of fraud or thefts as these codes cannot be breached. IFSC codes are also present on every check leaf, thus making transactions through checks safe and secure. For example, you will have the SBI Patiala IFSC code on the check leaf issued by the bank.

It Facilitates Easy Communication

IFS codes also help to facilitate quicker and easier communication between two parties. Due to an IFS code, an email, as well as a text message, is automatically sent to both the payer and the payee whenever a transaction has taken place.

It Encourages Paperless Transactions

Banking has become paperless thanks to the IFS code. The IFS code helps to facilitate paperless, electronic transactions, encouraging environmental friendliness.

It Assists Banks on Validation and Reconciliation

IFS codes help banks invalidation and reconciliation. Without these codes, banks may run the risk of remitting funds for their customers.

What is a MICR Code?

The term MICR is an acronym for Magnetic Ink Character Recognition. The MICR code is often used to authenticate banking documents. It usually consists of nine digits and is found on the bottom of all bank checks. In a way, MICR codes are similar to bar codes, except they are numerical. They can also be used to verify checks before clearing them. MICR codes consist of the account details, check number, and the control indicator. These codes are used to authenticate check-based transactions and are essentially fast, efficient, and reliable.

What are the Differences between a MICR code and an IFSC code?

There are many differences between a MICR code and an IFSC code. One of the major differences between the two is that while an IFSC code is used to enable fast and secure electronic fund transfers, an MICR code is used to enable quicker processing of checks. The other major difference between the two is while an IFSC code often consists of 11 characters; a MICR code consists of nine characters.

Also, the first four characters of an IFSC code represent the name of the bank, and the last six characters represent its branch. But in the case of a MICR code, the first three characters of the code represent the city where the branch of the bank is situated, and the last three characters represent the branch.

Who Allots the IFSC Codes?

Most customers are of the misconception that the IFSC codes are allotted by their respective banks or branches. This, however, is not the case, as only the RBI or the Reserve Bank of India is authorized to allot these codes. The RBI allots the IFSC codes to different banks across the country as well as for their respective branches. So, the IFSC codes of the different banks, as well as their respective branches, can be found on the official website of the Reserve Bank of India.

It is often the Reserve Bank of India that has complete control over the IFSC codes allotted to various banks as well as their branches. This means that only the RBI has the authority to modify or make changes to the IFSC codes of the different banks. For example, if the SBI Patiala IFSC code must be changed, then the only body authorized to do so is the Reserve Bank of India. IFSC codes are often changed from time to time in case there is a change in the address of the branches.

What Are IFS Code Errors and How to Resolve Them?

At the time of the transaction, some errors may occur while entering the IFS codes. So, one should be extra careful and verify whether he or she has entered the right IFS code or not. If you enter the wrong IFS code, then the transaction may be incomplete or worse, the amount may be credited to the wrong account. So, you should be wary and make sure you have entered the right IFS code when performing a transaction.

The Final Words:

Thus, the different IFS codes, including the SBI IFSC code, are essential to perform transactions, especially through the online mode. So, make sure you enter the right IFS code of the payee's bank and double-check before you make the payments. If you are not sure about the IFS code of the bank you are about to make the payment for, check it out in reputed websites like the RBI.