Difference between IFSC and MICR



The Indian Financial System Code (IFS code or IFSC) is a unique 11 digit alphanumeric code assigned to all banks by the Reserve Bank of India (RBI). Each of the code is represented by a unique pattern and assigned to each bank based on various factors. The IFSC code helps in making online transfer since it locates the beneficiaries branch accurately. With the inclusion of the code, online fund transfer such as National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), etc. are carried out nationally. An account holder can find his/her bank’s IFSC by referencing to the cheque book, account opening booklet, or by performing an online search with the bank’s address. Alternately, an individual can also use this code to find branch details.

Why is IFSC required?

In order to avoid conflict while transferring funds from one account to another, the government of India has introduced the IFSC factor. By following the coding methods used in Society for Worldwide Interbank Financial Telecommunication(SWIFT), IFSC acts as an effective identifier for banks across India.

Understanding the coding pattern in IFSC

The 11 digit IFSC is divided into two major identifying factors. The first four letters represent the name of the bank and the last six digit presents the branch while the fifth digit is a zero by default to indicate a split between the letters and numbers.

Considering the fact the first four letters depend on the name of the bank, the last five digits are assigned their branches serially as in when they are inaugurated or added.

IFSC facts

  • Introduction of IFSC – The IFSC code was introduced by the government of India to avoid conflicts that may arise while transferring funds online. IFSC helps in avoiding situations where the funds get transferred to a wrong account, funds returning due to a mismatch in details, etc. With the usage of the IFSC, the funding facility is empowered with a superior and advanced identifier.
  • Identification process – The coding technique allows an individual to locate the accurate details of a branch every time as these codes are unique. A bank cannot have more than one IFSC while each IFSC will not locate more than one branch. There are various websites including the government’s and bank’s’ website which lists out IFS codes based on state, city/town/district name, etc. An individual can easily use these details to locate the IFSC for their bank’s branch or use the IFSC to carry out an online search.
  • Subject to changes – Government of India has introduced IFSC to provide an effective online fund transfer system, however, RBI being the governing body for banking and financial system in India has the authority to amend details pertaining to IFSC.

Difference between IFSC and MICR

In order to understand the difference between IFSC and MICR, it is essential to understand MICR which stands for Magnetic Ink Character Recognition. MICR is a character-recognition technology that helps in the processing of cheques and other banking transactions. The MICR encoding is referred to as the MICR line which can be seen at the bottom of a cheque. It uses a method which is similar to barcodes but unlike barcodes, MICR is mentioned in a human readable format. MICR is an old system which contains the details of a cheque. In an MICR code which is made up of 9 digits numeric code, the first three digits represent the city where the branch is located, the next three digits indicate the bank while the last three are the identifier for the branch.

  • An IFSC helps individuals in carrying out online transactions such as fund transfer, bill payments, etc. while the MICR allows transactions through cheques.
  • IFSC consists 11 digit alphanumeric code whereas the MICR contains 9 digit numeric values only.
  • The presence of IFSC is mandatory for an online transaction (depending on whether the bank allows online transfers or not} while MICR is essential for processing of cheques.
  • IFSC helps in avoid online fraud while transferring money online while MICR avoids forging and faking cheque leaves.
  • MICR is an old method while IFSC is a comparatively new system.
  • IFSC is restricted to fund transfers within the nation but MICR is used for international transfers as well.

Similarities between IFSC and MICR

  • Both IFSC and MICR are designed to facilitate fast and efficient remittance of funds.
  • Banks are instructed to print IFSC and MICR on the passbook and account statements.
  • IFSC and MICR help in avoiding fraud in transactions and exchange of funds.
  • RBI keeps an account of the originators and the beneficiaries by collecting the information of the bank from where funds are initiated to which bank it is being settled, with the use of IFSC and MICR codes.
  • Both the codes can be obtained easily by performing an online search or by contacting the bank.

IFSC and MICR are implemented in banking transactions to avoid errors and facilitate a fast and efficient processing speed. While both of them help in avoiding transaction fraud, they also act as identifiers for banks throughout India.