IFSC and MICR — What are these?

Each of us might have done any number of online transfers or received money from someone in our bank account online. What is used most commonly in such transfers is the IFSC code. But do you know what it means?

IFSC stands for “Indian Financial System Code” and is an 11-digit code made of alphabets & numbers. In any IFSC code, the first 4 digits represent the bank, the 5th character is usually Zero and the last 6 characters represent the branch.

So, the IFSC code is used to identify a unique bank branch from the branches list maintained by the Central Bank’s NEFT (National Electronic Funds Transfer) network. Now you might also have heard of something called MICR — “Magnetic Ink Character Recognition”.

MICR is used for easy identification and processing of cheques (I think the number of cheque transactions has drastically come down these days). Some of us might have used what’s called an ECS (Electronic Clearance System) for recurring payments.

In a MICR code, the first 3 digits represent the city, the next 3 digits represent the bank and the last 3 digits represent the branch. So, MICR plays an important role in ECS transactions by uniquely identifying the bank and the branch.

Now, you might ask me, “if just 9 characters of MICR is good enough, why do we need 11 character IFSC code?” Honestly … I don’t know. It could be that the systems evolved for different purposes initially and converged later.