MICR Full Form

MICR

MICR stands for Magnetic Ink Character Recognition. The strange-looking letters that are printed usually on the bottom of the cheques and demand drafts from the banks are printed in special ink that has magnetic properties. These letters help in the identification and faster processing of cheques. This is a class of technology by itself.

The line of special letters at the bottom of the cheques has three groups of letters. Each of these groups identifies one of these three features:

• Cheque Number
• Account number, and
• Bank routing number

This technology is referred to as magnetic ink character recognition line because the technology that is used to print it is essential for allowing a machine to read, record, and even process the information. Incidentally, it is not only machines that can read it, but the printing is also in human-readable type too. The font that is used to print these letters is unique and cannot be faked (both the magnetic ink and the style of the letters).

These measures allow the prevention of cheque fraud and also enhance the rate of processing of cheques. This technology was developed in the middle of the 20th century and is now widely used all over the world. The magnetic ink character recognition allows computers to read, record the information that is printed on the cheques and other banking instruments. This was a system that was created by the American Bankers Association or the ABA, in the 1950s. This became the industry standard later, being recognized by the American National Standards Institute (ANSI).

MICR is not just the account number. There is much more information in that line. It is usually printed on a small white band at the bottom of the cheque or other instruments. The magnetic ink that is used for printing can be read by the machines even if it is covered by signature or other stamps or cancellation lines, etc.

The MICR lines that are printed at the bottom help in the rapid clearing of the cheques that are sent to the central processing centers of the banks at the end of the day daily. The special letters are so printed that they can be easily read by the machines and people so that there is no hindrance to communication. The fonts that are used for printing are of two types – E13B and CMC-7. 

The cheques issued are processed by banks and clearinghouses. At the banks or clearinghouses, the cheques are validated first. The correct amount is deducted from the account and put into another account. A single cheque could end up being processed several times at different banks or even the central bank – in our case the Reserve Bank of India. An important part of processing a cheque is to identify the bank, account number, and cheque number. MICR printing has automated that process. The machine that is used for the processing of the cheque is sent through a ‘sorter’. A sorter is essentially a scanner that reads the information that is printed in magnetic ink. 

Several companies make the sorters that are used in the processing of cheques. It usually takes less than 1/1000th of a second to read a single check. These cheques can be read several times as needed. 

MICR, though predominantly used in the banking industry, also has other applications where there is a requirement of high security. One of the main benefits of a MICR line on a cheque is that it has the bank routing number printed on it. This makes cheque processing very fast as the banks are automatically identified and the amounts processed.

Fraud is an important concern of the finance industry and the application of MICR in cheque processing has helped in reducing the frauds that are associated with the financial industry.

Conclusion

MICR stands for magnetic ink character recognition. It is a special line that is printed at the bottom of the cheques using special magnetic ink. This line helps in identifying the correct account number, cheque number, and the issuing bank. This technology was invented by the American Bankers Association that was recognized as a standard by the American National Standards Institute (ANSI) and adapted the world over later.