What is MICR Code
24 Nov 2021

What is Magnetic Ink Character Recognition?

How does MICR Code help in fast-tracking cheque clearances?

Key Takeaways

  • MICR Code full form is Magnetic Ink Character Recognition.
  • It is a unique nine-digit code to identify a bank and branch participating in the ECS Credit scheme.
  • The RBI assigns every bank branch a unique MICR Code.
  • IFSC Code and MICR Code are equally important for making financial transactions through NEFT, IMPS, and RTGS.
  • MICR Code helps to speed up the cheque clearing process.

Have you ever noticed those magnetic ink code bars located at the bottom of every cheque leaf in your cheque book? The is a unique ink code – a special language that only bankers can decode. That ink code is not a mere thing of decoration. Instead, it plays a vital role in banking transactions and is known as the MICR code. Let us understand what is MICR code of bank in this article.

What is MICR Code?

MICR Code full form is Magnetic Ink Character Recognition. Back in the 1980s, the Reserve Bank of India introduced this 9-digit code for safe and effective payments. The RBI assigns each bank a distinctive MICR Code. It comprises a character-recognition technology that allows bankers to identify bank branches and speed up the cheque clearing process.

The MICR Code is used to identify a bank and branch participating in the ECS Credit scheme. This nine-digit code is unique and ensures that all banks using cheques for financial transactions are recognised by the RBI. The MICR Code is generally located at the bottom of each cheque leaf in your cheque book, representing a thin strip. You can also search for the MICR Code of your bank branch online.

MICR Code in Cheque – Role and Functions

You generally need a MICR Code while filing application documents on financial instruments like investment portfolios, lumpsum mutual funds, and SIPs.

This code performs the functions of a barcode for banks involved in any transaction under the Electronic Clearing System (ECS) credit. ECS Credit is used to authenticate the originality and legality of paper-based documents in the banking system.

Decoding the MICR Code

The MICR Code comprises three parts:

  1. The first three digits represent the pin code of the city.
  2. The next three digits represent the bank code.
  3. The last three digits represent the branch code.

MICR Code - Example

the MICR Code for the Fort Branch of DBS Bank is 400641002 where

  • The first three digits (400) represents Mumbai - the city code
  • The next three digits (641) represents DBS Bank
  • The last three digits (002) represents the branch code for the Fort branch.

How Different is MICR Code From IFSC?

Simply put, the Indian Financial System Code (IFSC Code) is used to initiate online or electronic money transfers from one bank to another within India. On the other hand, you can use the MICR Code for global fund transfers. IFSC Code represents only the bank code and the branch code. But MICR denotes the pin code, bank code, and branch code.

Final Note

As someone who needs to conduct regular banking transactions, knowing what is MICR can prove helpful. IFSC Code and MICR Code are equally important for making financial transactions through payment systems like NEFT, RTGS, and IMPS. While most people have embraced online fund transfers, MICR continues to remain relevant and crucial, especially for high-value fund transfers via cheques.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.