What am I
My name is magnetic ink character recognition (MICR) code. I get my name from a special type of ink which is made of magnetic material. I am a nine-digit number printed on a cheque or a demand draft. You will find me just beside the cheque number at the bottom of the cheque leaf.
What the digits signify
My first three digits denote the city where the cheque or the draft was issued. It is aligned with the postal code of the city. The fourth to sixth digits denote the bank’s code while the last three digits denote the branch code. For instance, in the MICR code 400240019, 400 denotes Mumbai, 240 denotes HDFC Bank Ltd and 019 denotes the branch of the bank located in Apollo Bunder, Mumbai.
What’s my significance
I am used by banks to facilitate processing. Unlike when a cheque is manually cleared, which involves the possibility of human error, my code is read by a character recognizing technology-enabled machine. Just like the machine that reads the magnetic strip at the back of your credit or debit card, this machine reads me. I minimize chances of error in the clearing process of cheques or drafts hence making the process faster.
When am I needed
The biggest benefit I offer is that I speed up the processing time. I am also used in online transfer of money. I am used by companies to directly credit salaries or dividends into their employees’ accounts. If you mention me on the refund form you submit to the income-tax department, you will get the refund faster since it will be directly credited into your savings account.
Things to keep in mind
Whenever you cancel a cheque, ensure that you mutilate the MICR code and write the word “cancel” across the face of the cheque. This will ensure that the cheque is not misused just in case it falls in wrong hands. Also never write or sign on me. Ensure that you do not fold or staple the cheque in a way that it damages me or else it will be difficult for the machine to read me.