MICR in banking stands for Magnetic Ink Character Recognition.
MICR is a character recognition technology used primarily by the banking industry to ease the processing and clearance of cheques and other documents. It involves printing characters with a special magnetic ink, which can then be read by machines.
Key Aspects of MICR:
- Technology: MICR employs special ink containing iron oxide. This ink allows machines to read characters even if they are overprinted or obscured by marks.
- Location: MICR characters are typically found at the bottom of checks, deposit slips, and other similar documents.
- Information: The MICR line usually contains critical information, including:
- Routing Number: Identifies the financial institution.
- Account Number: Identifies the specific account.
- Check Number: A unique identifier for the check.
- Other Codes: Transaction codes and amounts might be added after the check is processed.
Benefits of MICR:
- Accuracy: Machine readability minimizes human error in processing.
- Speed: Automated processing significantly speeds up check clearance.
- Security: The use of magnetic ink makes it difficult to counterfeit or alter checks. While not impossible to counterfeit, the specific magnetic ink and unique fonts increase the difficulty.
Example:
Imagine a check. At the bottom, you'll see a string of numbers printed in a specific font. This is the MICR line. The first set of numbers is the routing number, the next set is the account number, and so on. These numbers are read by machines at banks to automatically process the check.
How MICR Works:
- Printing: Characters are printed using magnetic ink.
- Encoding: The characters are encoded with a unique magnetic signature.
- Reading: MICR readers magnetize the ink and then detect the unique signal from each character.
- Processing: The information is then used to automatically process the transaction.
