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Full Form of MICR - Magnetic Ink Character Recognition
The full form of MICR is Magnetic Ink Character Recognition. It is a system used to recognize characters with the help of special ink and characters, in other words. Therefore, it can be understood as a technology used to verify the originality and authenticity of physical documents (especially cheques), mostly used by banking institutions.
How MICR Technique Works?
MICR helps encode the numbers mentioned in magnetic ink displayed on the base of a cheque. MICR technique works by passing a physical document such as a cheque containing magnetic ink that one must read with a machine that can magnetize the ink on that document and then translate its magnetic information into characters. A laser printer is used to print magnetic ink, which is not a regular printer. The laser printer used for MICR accepts magnetic ink and character recognition toner.
How is a MICR Code Created?
A magnetic ink and character recognition code is a 9-digit number. The first three digits of the MICR code are used to represent the city code. The next 3 digits represent the bank code, and the last three digits signify the code of a particular bank branch. Therefore, magnetic ink and character recognition codes are created by taking the city, bank, and branch codes. The bank code differs from bank to bank, and the branch code differs from branch to branch. The branch code of a bank is not the same for all. For example, if the code of a particular city is 333, the code of that bank is 666, and its branch code is 999, then the MICR code for the same would be 333666999.
Features
One of the most important features of magnetic ink and character recognition is that it enhances security and minimizes the losses caused by a few criminal activities such as phishing, social engineering, hacking, etc. It is a character-recognition technology that banks mainly use for simplifying and easing out the processes and clearance of checks and other physical documents. Magnetic ink and character recognition use special magnetic ink and characters. Magnetic ink and character recognition are secure, reliable, quick, and save manual effort.
Why use MICR?
Magnetic ink and character recognition are mandatory to file various financial transaction forms like SIP, investment, or even for transferring funds. One can also use MICR to ensure the authenticity and originality of physical documents like cheques. MICR must also be used to eliminate the possibilities of human errors and initiate quicker transactions that are impossible to achieve in manual processing. In addition, MICR provides a higher security level, eliminating the slightest probability of the documents getting forged. Banking institutions use MICR to verify the validity and enhance the security of authorized cheques.
Difference Between MICR and IFSC Code
MICR stands for Magnetic Ink and Character Recognition, whereas IFSC code stands for Indian Financial System Code. MICR is a nine-digit code that helps in the unique identification of the participating bank and branch in an ECS (Electronic Clearing System. In contrast, IFSC is used to identify bank branches that operate within the NEFT (National Electronic Funds Transfer) network by the Central Bank. The first 3 digits of the MICR code represent the city code, which aligns with the postal code. The next 3 digits of the MICR code signify the bank code and the last 3 digits signify the branch code. The first four digits of the IFSC code highlight the bank, while the next six characters represent the branch’s details. The last character is represented as zero.
How MICR code makes check processing faster?
MICR eliminates the risk of fraud and errors. MICR even helps process cheques faster since it is digital and not manual. The MICR code is printed on the cheque with unique and unusual magnetic ink. This magnetic ink is made with iron oxide, and it has a magnetic material that makes it machine-readable and 100 percent error-proof.
The check sorting machine or a reading machine reads through the inserted check in MICR. It helps identify the branch name to which the check belongs and activates the automatic clearing process. It makes the visibility of the MICR code clear for the check reading machine or sorting machine. If the Magnetic Ink and Character Recognition code are not visible for some reason, the check reading machine or sorting machine can easily trace the same.
All the bank branches enable MICR code, which means the checks' processing will be faster.
Conclusion
MICR code is a technology used for character recognition by industries like banking, aviation, etc., to simplify the processing of checks and other documents. The MICR encoding (also called the MICR line) is placed at the bottom of the check and other documents. It typically comprises a bank code, document-type indicator, bank account number, cheque amount, and a control indicator. Magnetic Ink and Character Recognition offers a quick and reliable method for scanning and processing information in physical documents (especially cheques). It is mostly taken into use by banks. MICR is used for capturing and describing the functionality of MICR. It also reduces physical paperwork concerning clearing processes. The MICR code is provided at the base of a check.
MICR should not be confused with the IFSC code. Both of these codes are way different from each other.
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This article is a guide to the Full Form of MICR, i.e. (Magnetic Ink Character Recognition) and its definition. Here we discuss how it does work, how the MICR code creates, its features, and its differences from the IFSC code. You may refer to the following articles to learn more about finance: -
