Magnetic Character Reading machines read cheques and process them within a very short time using MICR Code reading system. MICR code is a 9 digit code which includes important information about bank and branch. MICR Code is printed in special font with a magnetic ink, it usually contains iron oxide and is easily recognisable by a magnetic reader. A special magnetic reader is used to read these characters, which can be easily read by humans too. MICR Code is usually printed on the bottom strip of cheque leaf.
The first three digits in the MICR code represent the city in which the branch of the bank is located. In most cases it is in sync with the PIN code of the postal addresses in India. The next three digits stand for the bank code while the last three digits represent the bank branch code.
If MICR is 110010020 the first 3 digit 110 represent NEW DELHI, 001 represent ALLAHABAD BANK and 020 is the branch code of SCINDIA HOUSE.
MICR code helps to read the cheque information faster and aid the process of clearing cheque very fast. This code helps RBI to identify the bank branch and finish the clearance process faster.
Basically the automated cheque clearance process is based on MICR Code itself. The cheque reading machine or a cheque sorting machine reads through a cheque when inserted and identifies the branch the cheque belongs to and activates the automation clearing process.
Magnetic Ink Character will help the machine to read the cheque number accurately and clearly even if the number is not clearly visible to the machine.
Since every bank branch has a unique MICR code, it not only enables identification and ease of transactions but also act as a fine tool for authentication of cheques and plays an important role in securing the account of an individual in a branch.