What is IFSC code

IFSC stands for Indian Financial System Code. The Reserve Bank of India (RBI) utilises the IFSC code for electronic money transfers between banks, as it helps them verify the transfer of resources. No National Electronic Funds Transfer (NEFT) transactions can take place without the IFSC code.

What is an IFSC code?  
 

An IFSC code serves as a unique identification code for each bank branch in India. This code comprises 11 characters. The first four characters represent the bank's name, while the last six signify the branch. A fifth character, usually zero, acts as a space between the two. People use this code mainly for electronic money transfers.

For example, during NEFT or RTGS transactions, you will find that this code acts as an address for the bank branch. RBI mandates this system for accurate, speedy transactions. While making a transfer, you must provide the correct code. Each IFSC code number stands exclusively for a specific bank branch. No two branches (even of the same bank) can have the same IFSC code, making it a crucial part of financial operations. 

How does IFSC CODE work?
 

Now that you know the IFSC meaning, wondering how it works? When you initiate an electronic fund transfer, the sender's bank utilises the IFSC code. It identifies the beneficiary's bank and the specific branch. The beneficiary's bank receives this transaction request and checks the code. This verification confirms the transaction details. It then credits the money to the correct account. An accurate code is important because a wrong IFSC can lead to transaction failures or misdirection of funds. 

It may be just one small part of the vast network that facilitates electronic payments and banking transactions, but its importance cannot be ignored. As each code corresponds to a specific bank branch, it ensures that every transaction reaches the right destination and remains distinct, making record-keeping, and tracking of transactions more efficient.

Where can I find my IFSC code of bank branch?
 

Cheque leaf:

Check the top left corner of any cheque leaf to find the IFSC code. You will see the branch's full address followed by your bank IFSC Code.

Passbook:

Your passbook holds more than just your transaction history. Go through its front sheet. Along with your account details, it holds your branch's details. Among this information, you can find the IFSC code.

RBI website:

Access the official website of the Reserve Bank of India. Navigate to the 'IFSC codes' tab. Select your bank from the list, input your branch name, and get your code. If you do not remember the branch name, no problem. Upon selecting your bank, the website will display a list of all branches with their respective IFSC codes. 

Bank website:

Today, almost all banks offer a branch locator tool on their official websites. Enter your branch's name or location, and the website will display your branch's IFSC code along with other branch details like address, phone number, etc.

When will I need my IFSC code?
 

The IFSC number is used by the Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) systems to transfer cash in bank accounts in India. As a result, the IFSC number is required every time money is transferred from one bank to another. You will need the beneficiary's bank name and account number, along with the IFSC number, to transfer funds. Always keep your IFSC number handy for swift banking experiences. By using correct details, you facilitate smooth financial exchanges and minimise delays.

What is the importance of the IFSC code?
 

The IFSC code is a pillar of the banking industry. It is important because:

• It aids in the identification of a specific bank branch.
• Helps in the elimination of payment transfer errors.
• Used for making NEFT, RTGS, and IMPS payments.

As you can see, its adoption guarantees smoother banking operations, enables swift transactions, and minimises risks for individuals as well as businesses.

Difference between IFSC Code, MICR Code, and SWIFT Code
 

Bank IFSC code
 

It is allocated by RBI to identify each bank and its branch. This code enables efficient and error-free electronic fund transfer between banks across the nation. Also, it helps in streamlining and automating various banking processes like NEFT, RTGS, and IMPS, which are used for interbank fund transfers. 

MICR code
 

Magnetic Ink Character Recognition (MICR) code is a technology that enables the processing of cheques electronically with complete accuracy. This is essential in avoiding errors as it is a printed code on the bottom of cheques that can be read only by magnetic ink reader/sorter machines.

It is a nine-digit code and comprises three parts:

• The initial three digits signify the city, aligning with India's postal PIN codes. 
• Middle digits denote the bank. 
• The last three digits represent the branch.

SWIFT code 
 

Society for Worldwide Interbank Financial Telecommunications (SWIFT) code finds its use in international transactions and ensures the safe transfer of money between banks across borders. Anytime you intend to send or receive money internationally, a SWIFT Code becomes essential. A SWIFT code contains the bank code, country code, location code, and branch code. Consisting of 8 or 11 characters, it uniquely identifies banks worldwide.

Modes of online money transfer using IFSC code (NEFT, RTGS, IMPS)
 

NEFT functions as a system where transactions are processed in batches during designated hours. Using a bank IFSC code number helps pinpoint the beneficiary bank branch, making transfers seamless.

RTGS caters to high-value transactions, typically above ₹2 lakh. The system processes these transfers instantaneously, leveraging the code to accurately route the funds.

Immediate Payment Service (IMPS) stands as a 24/7 service, making it possible to transfer money anytime, even on bank holidays. It is ideal for quick and immediate transactions. Just like NEFT and RTGS, IMPS relies on the IFSC number to guide the transaction to the appropriate bank branch.

How are NEFT and IFSC code related?
 

The NEFT system is a nationwide system that allows individuals, businesses, and corporations to make payments to anyone having an account at any branch in the country. Because the money is not sent in real time and is paid in batches, NEFT transfers are sometimes known as e-cheques. A NEFT payment cannot be made without the IFSC number. It is with the aid of the IFSC number the money finds its destination from one bank to another.

Given its importance in ensuring the accuracy and security of NEFT money transfers, RBI has issued every bank branch in India a unique IFSC code number.

How are RTGS and IFSC code related?
 

RTGS is described as the continuous (real-time) settlement of individual financial transfers on an order-by-order premise (without netting). You will need the IFSC code to find the branch where you will transfer payments using RTGS.

Without the code, finding the correct bank branch for the transaction could become a challenge. As a result, RTGS and IFSC numbers have become integral components of electronic fund transfers. 

The former ensures rapid transaction processing, while the latter provides a specific destination address. Together, they streamline the electronic funds transfer process in the country, making it easier to facilitate quick and accurate transactions for individuals and businesses alike.

Importance of the IFSC code in IMPS transfer
 

Immediate Payment Service (IMPS), which is also known as Interbank Mobile Payment Service, employs IFSC codes to provide 24x7 fund transfer services. The National Payments Corporation of India (NPCI), which is an entity that supervises retail payments in the country, provides the IMPS transfer service. Any money transferred using IMPS transfer immediately reaches the beneficiary’s bank account.  The importance of the bank IFSC code in IMPS transactions becomes clear: it streamlines the process, reduces errors, and allows for real-time, accurate transfers.

Before making a new payment on the IDFC FIRST Bank website or Mobile Banking app, you will need the beneficiary’s IFSC code. Once you enter the code, the IDFC FIRST Bank website or app detects the branch where the account was opened.

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The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.