With internet banking becoming such a snowballing phenomenon, banks have to ramp up the accuracy and safety of such transactions. One of the ways to do that is by making details such as the IFSC number of the participating banks a mandatory pre-requisite when conducting these digital transactions.
What is the IFSC Code?
The Indian Financial System Code is a unique 11 character alpha-numeric code awarded to a bank’s branch if it facilitates online banking. An IFSC such as HDFC0000485 is made up of three parts-the first four alphabetic characters identify the bank’s name, the fifth character is a ‘0’ kept as a buffer for future expansion and the last six characters are the ones which represent the bank’s branch’s address and are usually numeric but can be alphabetical too.
IFSC is used while making fund transfer through electronic means through services such as National Electronics Fund Transfer (NEFT), Real Time Gross Settlement (RTGS) and Immediate Payment Service (IMPS). To successfully complete such a transaction, the payer needs to have the beneficiary’s bank’s IFS Code.
Benefits of IFSC
• Saves Time & Money:
Online banking’s biggest advantage over conventional banking is that it saves time. You can skip the traffic, the queues and the formalities of conventional banking and just outright complete your banking transaction within a span of minutes at your comfort and convenience. IFSC facilitates such online transactions and saves your time. Also, online banking enabled through IFSC helps make banking paperless and hence saves money. Such electronic banking is environmentally-friendly too apart from being simpler and quicker.
• Shorter Transfer Time:
Online banking enabled by IFSC also saves the time, effort and money, conventional services such as demand draft and bank cheques take for the fund transfer to be successful. Also the transaction is reflected in both the sender’s and the beneficiary’s accounts’ immediately as IFSC details are already confirmed. Moreover, other than the bank’s service charges (if applicable), there is no additional money spent to carry out such a quick transaction.
• Secure and Transparent:
For online banking, users need to submit key credentials including IFSC of the beneficiary which are subsequently verified by the bank. Only after the payer’s bank’s verification can a user make an IFSC-enabled fund transfer. This makes the process secure. Also, as online banking through the use of IFSC eliminates the human interference factor from the financial transaction process, such banking becomes more transparent and accountable and reduces the possibility of any kind of scam which can be carried out in the system. Moreover, in online banking since both the sender and the receiver account holders are informed of the transaction immediately through SMS or email, such banking is less susceptible to fraud or any loss.
• Helps in Banks’ Reconciliation:
IFS codes are unique to each participating bank branch which is how they help in a bank’s data’s reconciliation and validation. Without IFS codes, accuracy of electronic transactions will go down and banks stand the danger of carrying out inaccurate transactions. Also since all banks are now digitally-enabled, online fund transfers facilitated through IFSC help them in quick reconciliation. Also, IFSC being mandated for individual as well as corporate transactions helps banks in disbursing funds quickly and correctly. IFSC also makes it easy for banks to communicate and comprehend transactions across their branches and with the other banks too.