Why IFSC Code is Required to Transfer Money?

Indian Financial System Code or IFS code is an 11-digit alphanumeric code which is unique to the bank’s identity. The code is used to identify each branch of a bank with a unique identification number. The code will be used by all the Indian banks that participate in the NEFT and RTGS payment settlement systems.

RBI has issued an IFS code to every bank in India to streamline the electronic funds' transfer process.  It is mandatory to provide IFS code to transfer funds online between two bank accounts. It is essential to get the right IFS code from the payee.

The code is widely used to transfer funds in various ways such as NEFT, RTGS, and IMPS.

What is the Structure of IFSC Code?

In this 11 digit code, the first four characters disclose the bank name; the fifth character is a zero to have room for expansion of the bank branch and the last 6 define the bank location.

It is easier to find the IFS code on the cheque-book and even on the cheque slip.

To cite an example - SBIN0004384

  1. SBIN -        Bank Branch ( State Bank of India)
  2. 0 -         Zero
  3. 004384 -       Branch Code (Dwarka, Sector 10, New- Delhi)

Simply put,

  • IFS Code is an 11 digit code, which contains numerals and alphabets both
  • The initial four codes represent the bank
  • Zero is the fifth digit- it is kept for future us as per RBI instructions
  • The last 6 digits represent the bank branch code

You can easily search IFS code of a bank online on their website.

Benefits of IFSC Code

The following benefits are available with IFSC Code:

  • Facilitates Electronic Fund Transfer - By using IFSC code, you can transfer funds instantly from one bank to another bank. You can transfer funds from your bank account to another bank account by internet banking.
    The online banking will save time and there will be a great convenience. You should mention the beneficiary bank account number, bank branch and IFSC code to transfer funds without any issues.
  • Instant Money Transfer- The money will be transferred instantly by mentioning the IFSC code of the recipient bank branch. You can transfer funds instantly by using your mobile phone, tablet or laptop as per your convenience.
  • Avoid Frauds - IFSC code is used to transfer funds in a secured manner. IFSC code will be allotted to each branch of a bank. Hence, by using IFSC you can identify the bank as well as the branch.
  • Facilitates Communication -The sender will get a notification about the deduction of money from his account and the receiver will get a notification about the credit of money. The information will be sent to both by the respective bank branches.
  • NEFT and RTGS - NEFT stands for National Electronic Funds Transfer. Individuals, partnership firms and businesses can easily transfer funds via NEFT. NEFT is used to transfer small amounts less than Rs. 2 lakhs per day.

The fund transfer request can be initiated by a bank on behalf of the customer. If you have internet banking facility, the fund transfer can be initiated by accessing your online account.

RTGS (Real Time Gross Settlement) is an online fund transfer mechanism where the funds are transferred on a real-time basis.

RTGS is used for bulk transactions. In both NEFT and RTGS transactions, customers need to mention the IFS code.

  • Paperless Money Transfer - The money transfer will take place very quickly and you will transfer money through electronic gadgets. Hence, you will not want to use paper. The printing cost can be avoided. Thus, you can save the environment.
  • Payment of Bills - You can pay bills and book money online by using the IFSC code-based systems.
  • Identification of Location and Branch - The code will help in the identification of the correct bank and its branch. There will not be scope for duplication.

How to Find the IFSC code?

You can find the IFSC code in the following manner-

  • Visit the official website of RBI
  • Visit the official website of your bank (all banks which participate in NEFT and RTGS will publish the IFSC code on their official websites)
  • Visit the bank branch
  • The cheque leaf given by your bank
  • Visit reputed third-party websites which share financial information

How to Search for IFSC Code?

To search the IFS code, you should enter the following information on the website:

  • Select the bank (SBI, Axis, HDFC, etc.)
  • Select the State (Andhra Pradesh, Maharashtra, etc.)
  • Select District
  • Select Branch

Methods of Online Fund Transfer Using the IFSC Code -

  • NEFT - To send money through NEFT, the sender has to provide the recipient name, IFSC code of the beneficiary bank branch, account type, and account number. Funds transferred through NEFT are settled in a batch-wise format.
  • RTGS - It is generally used for high-value transactions and the money is transferred instantaneously. The sender needs to provide details including the name of the payee, account number, IFSC code of the receiving bank branch, and the amount.
  • IMPS - Using IMPS, the sender can send the money to the beneficiary bank immediately on a real-time basis. IFSC code is mandatory to process all the IMPS transactions.

Simplified Banking Solutions

With the implementation of IFSC-based payment systems, banks are able to facilitate quick fund transfer options. Individuals, as well as businesses, will be able to make quick and error-free transactions in a few seconds.

If you would like to transfer funds during the holidays, you can choose IMPS. The immediate payment system will help you transfer funds on a 24/7 basis without any issues.  The transfer of funds can be done quickly without any errors by choosing the IMPS.

There are many banks which facilitate IMPS based on IFSC Code. Hence, IFS code plays an important role in transferring the funds from one person to another person by online channels.

What Is the Major Difference between IFSC Code and MICR Code?

  • IFS code is acquired to transfer electronic funds from one bank account to another within India. And the MICR code uses the Magnetic Ink Recognition technology that makes the processing of a cheque faster.
  • MICR is a 9 digit numeric code, where IFS code is an alphanumeric 11 digit unique code

In a Nutshell

IFSC codes are issued by Reserve Bank of India (RBI). They are used to perform various kinds of fund transfers including NEFT, RTGS, and IMPS.

IFSC Code will help in performing safe and secure online transactions. Individuals and businesses will be able to transfer funds to intended destinations without any ambiguity.

Banks will conduct financial operations without any difficulty with the implementation of robust online transfer channels.