Every time you are making an online money transfer In India you need an IFSC Code of the recipient bank account. Have you ever wonder what this IFSC Code stands for and what is the significance of it in terms of online banking in India? More and more people today are using online banking services to transfer money, make payments, etc.
Internet banking has become the new norm replacing the days when you had to physically visit a bank to transfer a fund. Transfer of funds is the most utilized and necessary feature of the modern banking system. IFSC code plays the most important role in the transfer of funds between accounts across the country.
The internet banking boom has made it essential for RBI to establish an 11-digit unique code that identifies a particular branch across India. You will always need an IFSC code when you are transferring money from one account to another. This IFSC code helps to determine the source as well as the recipient branch of a particular person.
What is IFSC Code?
In India, every bank that is part of the National Electronic Fund Transfer has to have an IFSC code to enable the net banking facilities to the public. You can locate the exact location of any branch using the IFSC code in India. Every unique code works as an identifier of the branch location across India.
IFSC stands for Indian Financial System Code that acts as a location identifier for every branch in the country. It ensures money transferred ends up in the correct branch account. Real-Time Gross Settlement (RTGS) started back in 2004 and National Electronic Fund Transfer (NEFT) started in 2005, both systems utilize IFSC Code to facilitate fund transfer among the banks.
IFSC code is provided by the leading banking institution In India, the RBI (Reserve Bank of India). It assigns unique codes to every branch in the country to make it identifiable and traceable for every transaction.
Break Down of IFSC Code
IFSC Code consists of 11 digits, every letter having an identifier of its own. In India, there are a huge number of banks both Private and Public-sector which taken together forms a huge network of branches across the country. IFSC code was introduced to efficiently identify a branch from the huge network of branches, to make fund transfers easier and convenient.
An example of IFSC code will be written as SBIN0000691 which is the IFSC code of State Bank of India, New Delhi Main Branch.
- The first four digits (SBIN) in the IFSC code above represents State Bank of India.
- Followed by Zero(0) which is reserved for future use in case the number of branches rises to the required number in the digits of IFSC code.
- The last six digits (000691) represents the New Delhi Main Branch of State Bank of India.
Every branch has its own unique combination of alphanumeric characters that act as its unique identification across the banking network.
Benefits of IFSC Code
IFSC code is vital for the Indian banking sector and it has the benefits of making internet banking safer, smoother and convenient for the public. There are several benefits of IFSC Code other than just identifying a branch location.
Not only banks but any other money transfer system that is regulated by RBI must use the IFSC code for any kind of money transfer. You are always required to provide the IFSC details of the recipient account for any transfer to go through using any transfer services.
While taking a personal loan you are required to provide your account details to the lender so that they can transfer the approved loan amount to your bank directly.
IFSC code helps any regulatory body to trace a transaction back to the source or find the recipient of any sum of money. This can help curb the financial frauds and lower the chances of mistakenly transferring money to a different account than intended.
- Communication: IFSC code helps to communicate the details of a branch from where a transfer is initiated to the recipient branch details. It helps in quick and efficient communication about any debit or credit of any account.
This helps the person sending the money to know when his account is debited with the amount. The receiver also gets a message or email about the money being credited to the account.
The bank through the IFSC code identifies the branches involved and initiates the updates through message or email to the users. This is an efficient way to keep track of the money transfer and refer back to it in case there is any issue regarding the transaction later.
- Convenience: IFSC code makes internet banking easier and accessible for the general public. Anyone with the account number and IFSC code of the recipient branch can now send money without visiting any branch or filling up forms.
The ease of transfer and flexibility to be able to make a money transfer from sitting at your home has made IFSC code an integral part of the modern-day banking. Most users today prefer to send and receive money over the internet rather than visiting a branch or using cheques standing in the queue.
You can also transfer money using the various other money transfer services online even after banking hours sitting at home. Online money transfer is quicker than the traditional method making it useful in emergency situations without waiting for clearance and other banking procedures that take a longer time.
- Safety: IFSC code has made it very secure for people to send and receive money online. Every branch in the country has a unique IFSC code that can be easily used to trace any transaction back to the originating branch or the recipient branch.
This makes it impossible for thieves and fraudsters to cause any trouble in money transfer. IFSC code provides a secure conversation basis for branches to communicate with each other making it safer. In case of fraud or theft, any transaction can be traced back to the branch where it originated which can help track the thief.
Security breaches are not very common in modern banking after the introduction of IFSC code. If you use online banking safely and use the IFSC codes properly, theft or frauds are next to impossible.
No money can be transferred to any account in the country without the IFSC code making it a single frontier for keeping all the online fund transfers in check and monitor them effectively.
- Settlement and validation: IFSC code helps the banks to settle the funds transferred through other banks. Validating any account is simple and easy by using IFSC code as it links directly to the bank accounts of a particular branch.
It also helps banks in keeping records of the transactions to and fro from the branch to others. IFSC code also protects the banks during the remittance of funds to the customers. Individuals, as well as corporates, can use the benefits of IFSC for their business and other payments.
Any payment undertaken has to be associated with an IFSC code making it ideal for organizations to value the importance of IFSC code. It has opened doors for convenient banking across the country with unified procedures and safety.
- Promotes Paperless Economy: online banking is also seen as a major contributor towards a greener environment as it helps save paper which otherwise was required for money transfer, the printing of the money, manufacturing the forms, etc.
All these can be cut down by using online banking that does not require any paperwork. As we already know every transaction of any nature will need IFSC code to warrant, it indirectly helps towards building a better environment.
Every online transaction works digitally making it ideal for banks to reduce paperwork and work towards making a paperless economy.
- Time-efficient: IFSC code makes it possible for every individual or organization to transfer money, pay bills, send salaries online without the need to visit a branch.
A lot of time is thus saved by the organizations and individuals who otherwise had to stand in long queues for transferring money from one account to another. Banks have also reduced their manpower required for tasks like fund transfers.
As more and more people are using internet banking facilities rather than visiting a physical branch it has reduced the workload of banks greatly.
IFSC code has become more relevant for today’s modern banking economy than it was a few years ago. It is the most important identifier for monitoring, supervising, tracking and routing of funds across banks and branches in the country. Online banking is safer and easier today because of the IFSC code and its inclusion in any fund transfer you perform online. You can find IFSC code of any branch with a quick google search, or look in the passbook of the account, or even look at the cheque provided by the bank. You can even call up the helplines of different banks and get specific IFSC codes of a particular branch within that bank.