What is IFSC Code

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IFSC Code brief explanation

IFSC Code refers to Indian Financial System Code, which is an eleven-character code assigned by RBI to identify every bank branches uniquely, that are participating in NEFT system in India. This code is used by electronic payment system applications such as RTGS, NEFT and CFMS.

The code is of 11 characters. The first part is the first four alphabet characters representing the Bank. Next character is 0(zero), which is reserved for future use. The last six characters are the branch code. To know what is IFSC Code deeply, go through the article fully. Otherwise, if you need IFSC Code of any branch, just follow the instructions below.

How to find IFSC code?

Normally, this 11-digit code will be printed on cheque book for NEFT enabled banks. Also, you can find bank IFSC code, bank details, branch address for all banks in India. By using the below 4 steps, you can easily find this code and branch location.

IFSC Code < Click Here

1. Select your Bank (eg : State Bank of India)

2. Select your State

3. Select your District

4. Select your Branch name – Now you can find IFSC Code, MICR Code, Address and Contact phone number of your bank branch.

Reserve Bank of India (RBI)

RBI is the central banking institution of India which controls Indian rupee and all banks. It controls inter-bank money transfer all over the banks in India through RTGS and NEFT. It was established in April 1, 1935 and nationalized in 1949. Reserve Bank of India is fully owned by government of India.

Functions of RBI

1. Authority in monetary

RBI monitors and implements the monetary policy which maintains price stability in productive sectors.

2. Maintain financial system

It manages country’s financial and banking system which provides cost-effective banking solutions to customers.

3. Foreign exchange management

Reserve Bank of India facilitates to maintain foreign exchange and trade FOREX (Foreign Exchange) market in India.

4. Currency issuer

Reserve Bank of India issues / exchanges / destroys currency notes and coins in India.

5. Role of development

RBI operates a wide range of development functions to achieve national goals.

6. Other functions

RBI maintains all merchant banking accounts for state and central banks.

RTGS (Real Time Gross Settlement) brief explanation

RTGS (Real Time Gross Settlement) is a fund transfer system used to transfer money from one bank to another. This gross basis transfer is a real time transfer system. This system can perform a large value of transaction and the minimum amount that can be transferred is Rs.2,00,000. There is no maximum amount limit for this transaction.

Time taken for transferring funds

The time taken for receiving funds to beneficiary account is real time when the remitting bank transfers funds. The remitting customer can receive acknowledgment from RBI,once the funds are transferred.

RTGS process

Normally, RBI allows to use four flow structure (V, Y, L, T) in fund transfer. In RTGS system, RBI decided to use Y shaped flow structure. The following flows of instructions are used in this structure.

1. The remitting bank will send payment instruction to central processor's technical operator.

2. The central processor acknowledge stripping of message and will send original message with set of instructions (the amount to be transferred, IFSC code of the branch, issuing and receiving bank’s identification etc.) to central bank.

3. The central bank processes debit of remitting bank’s account and credits to beneficiary bank’s account. Once the transaction is completed, it will send confirmation to central processor.

4. The central processor after re-constructing the payment message with stripped information (beneficiary details) will send the message to receiving bank with proper details.

RTGS processing/service charges

Benefits of RTGS

Real time fund transfer

All transactions are processed and settled in real time basis.

Credit risk eliminated

There is no credit and liquidity risks in RTGS payment system. The beneficiary bank customer can receive payment instantly once the central bank system accepted the request.

Efficiency of economy

Without exposing settlement risk, the payments are quickly and securely ensured in financial market transactions and major business solution.

RTGS coverage

The RTGS payment system was launched on 26^thMarch 2004 by RBI with only four banks involved in. Presently, it covers 109 banks in 13,750 branches and 508 clearing centers. More than 800 cities/towns are covered for customer transaction.

NEFT (National Electronic Fund Transfer) brief explanation

NEFT (National Electronic Fund Transfer) is an online National-wide fund transfer system supported by RBI. It is used by an individual, firm and corporate to transfer payment electronically. NEFT is used to transfer small and medium amount between banks and accounts. There is no minimum amount limit for NEFT.

Time taken for transferring funds

In NEFT process, funds are transferredon hourly batches. In week days, there are 11 settlements (starts at 9 A.M and ends at 7 P.M) and on Saturdays, there are 5 settlements (starts at 9 A.M ends at 1 P.M). Normally, the payment will be sent to the RBI within 3 hours,once the remitting account is given request for transaction. The actual time taken for complete transactiondepends upon the beneficiary bank to process the funds.

NEFT process

In this payment system process, payment transfer from remitting account to beneficiary account involves5 levels of operations. They are,

Level 1:

If anyone (corporate, firm or individual) likes to transfer their funds from their remitting account to beneficiary account through NEFT payment system, they need to fill the form with beneficiary account details (beneficiary account holder name, account number,IFSC code of the branch, maximum amount to transfer and account type). This application form can be available in all banking branches. There are also facilities available for customers to transfer their funds through online by using internet banking and mobile banking. Some banks offer to use NEFT transfer by using their ATMs. The remitting customer is authorized to transfer specified amount to beneficiary account.

Level 2:

The remitting bank branch prepares a payment transfer message and sends it to NEFT service centre.

Level 3:

NEFT Service Centre forwards the message to NEFT clearing centre (controlled by RBI) with details of next batch available to transfer payment.

Level 4:

The NEFT clearing centre then sorts all fund transfer requests as beneficiary bank-wise and then creates payment entries to debit funds from remitting banks and credits payments to beneficiary banks. Also, NEFT service centre sends response messages to destination, bank-wise.

Level 5:

The acceptance message receives destination banks from NEFT clearing centre and transfers credit to beneficiary account.

NEFT processing/service charges

From March 31, 2011 RBI refrain from insisting the processing/service charges to member banks. So, member banks who are participating in NEFT fund transfer need not pay any charges to RBI. The following charges are rationalized under RBI.

Beneficiary bank’s inward transaction:

No need to pay any charges from beneficiaries for payment transfer to destination accounts.

Beneficiary bank’s outward transaction:

Benefits of NEFT:

Eco-friendly:

The total process of NEFT is eco-friendly and drastically reduces paperwork.

Secure and efficient:

This system performs seamless transfer of funds from one bank to another. During the transaction, there are no chances for mistakes and the whole operation is said to be quick and highly secure.

Economic efficiency:

NEFT fund transfer service charge is much less when compared to pay order or demand draft.

Risk free transfer:

There are no credit and liquidity risks in NEFT payment system. The fund transfer request is processed and settled in daytime.

RTGS Vs NEFT

When compared to RTGS and NEFT, RTGS payment transfer system is based on gross settlement and NEFT payment transfer system is based on net settlement. Gross settlement is known for transaction held without bouncing other transaction on one-to-one basis. Net settlement is known for transaction completed in specific time of batches.

Basically, RTGS fund transfer is used for large amount of transaction and the minimum amount can be 2 lakhs.NEFT system allows to transfer small amount of funds and there is no minimum value.

Reading What is MICR Code, What is SWIFT Code and What is IBAN number… will make more understanding.