Most of us have heard about IFSC, or the Indian Financial System Code, which is used in electronic fund transactions in India. To be clear, we’re talking about the alphanumeric code on the first page of your bank documents, like your passbook and cheques.
Do you, however, know what an IFSC is and why it is necessary for conducting financial transactions? Here is all that you need to know about it.
What exactly is an IFSC code?
IFSC is an essential component of the financial infrastructure in India. It is a one-of-a-kind 11-digit number provided by the Reserve Bank of India (RBI) to identify an individual bank and a particular branch of that bank.
The structure of an IFSC code is such that the first four letters stand for the bank’s name, and the final six numbers denote the branch’s address, which is a mix of alphabetic characters and numeric digits. Zero is always used for the fifth character, and this value is unchanging throughout all codes.
Why is an IFSC code required?
It is impossible to place enough emphasis on the significance of the IFSC code. The process of transferring money online is now not only simple but also safe and open to anybody. The following is a list of some of the reasons why the IFSC Code is important:
- The IFSC code is necessary because it enables the Reserve Bank of India (RBI) to guarantee that all financial transactions go unimpeded and without hiccups. Using this straightforward code, the Reserve Bank of India can manage, supervise, and sustain all digital financial transactions. These transactions include NEFT, RTGS, and IMPS.
- The bank’s clients require the payee’s IFSC code to initiate most electronic financial transfers. This is one reason the IFSC code is crucial to bank customers.
- It performs the function of a confirmation parameter for the incoming money and confirms that it has been sent to the correct destination.
IFSC code: Benefits
With an IFSC Code, one may make use of the following benefits:
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Enable Electronic Fund Transfer
Using an IFSC code, money may be transferred instantaneously from one bank account to another. Online banking allows you to move money across accounts at different financial institutions. Banking online will be more convenient and save time.
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Instantaneous Cash Transfer
Fund transfers may be completed immediately by providing the IFSC code associated with the receiving bank branch. Instantaneous money transfers are possible using any modern mobile device, tablet, or computer.
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Avoid Frauds
A safe method of transferring payments is possible with the help of an IFSC code. Each individual branch of a bank will be given its own unique IFSC code. Therefore, if you use the IFSC, you will be able to identify both the bank and the branch.
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Enhances Communication
Both the sender and the recipient will be notified when money is taken out of or added to their accounts. The relevant banking locations will transfer the information to both parties.
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RTGS and NEFT
The acronym NEFT refers to the country’s national electronic funds transfer system. NEFT facilitates simple money transfers between individuals, partnerships, and corporations. NEFT is often used in India to send and receive sums below Rs. 2 lakhs daily.
As the name implies, RTGS (Real Time Gross Settlement) is a system for instantaneous online money transfers. The RTGS system is used for large-scale financial transactions. Customers must provide the IFS code after completing a transaction through NEFT or RTGS.
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Paperless Money Transfer
The transfer of funds will take place in a very short amount of time, and it will be accomplished via the use of various technological devices. As a result, it is unlikely that you will wish to use paper. It is possible to avoid incurring the expense of printing. As a result, you will be able to protect the environment.
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Bill Settlement
Through the use of the IFSC code-based systems, it is possible to pay invoices and conduct money transactions online.
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Identification of Site and Office
The code will help identify the proper bank and the appropriate branch of that bank. There is going to be little room for redundant work.
Can IFSC change?
The IFSC is not subject to revision or updating. However, the IFSC code is subject to change in the case of a bank merger or restructuring. An alternate code is generated and sent to the account holder in this scenario. This will guarantee that the money from your online transfer goes straight into the intended recipient’s account.
FAQs
Why is an IFSC Code used?
An IFSC code consists of 11 numeric and alphabetic digits. It is used to identify each and every bank branch in India uniquely.
How to get the bank name from the IFSC code?
The name of the financial institution may be deduced from the first four digits of the IFSC.
Does IMPS need an IFSC code?
Only in the case of a money transfer using the account number would it be necessary. If the beneficiary cannot get the MMID of the recipient, further information will need to be provided to enrol the recipient as a beneficiary.
What happens if an erroneous IFSC code is given during an NEFT transfer?
If you want to send money using NEFT, the recipient's account number must be in sync with the IFSC of the receiving bank. Both of them will be matched by the system. If there was a mistake, you might expect a refund of the money within several hours.
Does the bank's passbook include the IFSC code?
The IFSC code may be found in the bank's passbook. It's on the very first page of your account details.