SWIFT Code and IFSC Code: What Is Their Difference

SWIFT and IFSC are created to identify particular banks and their branches in financial transactions. SWIFT, or Society for Worldwide Interbank Financial Telecommunication, is an international payment system. IFSC, or the Indian Financial System Code, is an 11-character code that helps to identify the individual branches of banks in India. It facilitates interbank fund transfers through NEFT, RTGS, and IMPS.

What Is a SWIFT Code?

SWIFT is a unique character set that identifies financial and non-financial institutions and helps to wire transfers internationally. It helps identify the country, bank, and branch to that an account is registered. It consists of 8 to 11 characters long and is made up of the following:

• 4 letters — institution or bank;
• 2 letters — country;
• 2 letters or digits — location;
• Three letters or digits — branch, optional (‘XXX’ for primary office).

For example, the SWIFT code UK HSBC is HBUKGB4BXXX.

How is the SWIFT Code Used?

It helps ensure that money is sent and received safely and securely. For example, when an international money transfer is made, the sender must provide the recipient’s details.  SWIFT routes the funds to the correct bank and account, facilitates cross-border payments, and ensures compliance with national and international regulations.

Another function is to validate transactions and prevent money laundering, fraud, and other financial crimes.  Banks and other financial institutions communicate with each other using SWIFT. They exchange information about customers, transactions, and other important banking information.

SWIFT Code Example

An example is HBUKGB4BXXX. The first four characters (“HBUK”) specify the bank, in this case, HSBC UK. The following two characters (“UK”) stand for the country — Great Britain. The next two characters identify the location (“4B”) — London. Finally, three characters stand for the head office.

What is an IFSC Code?

Indian Financial System Code is an alphanumeric character set that helps to identify a particular bank branch in India. It has a format of 11 digits. The National Electronic Funds Transfer (NEFT) system uses it to transfer funds from one account to another. It is unique for each bank and contains information such as the bank branch, city, and state.

How is the IFSC Code Used?

It is used to make online payments, transfer money through NEFT (National Electronic Funds Transfer) and RTGS (Real Time Gross Settlement) systems, and for other online banking transactions.

It is also used to identify the branch for payment of taxes, such as income tax, corporate tax, service tax, etc. The Indian Financial System Code is required when setting up a new account. It is printed on all checkbooks issued by the banks and is published on the bank’s official website.

IFSC Code Example

It is a unique 11-character set of symbols used by the Reserve Bank of India (RBI) to identify banking branches in India. It consists of 11 characters:

• The first four alphabets are used to determine the bank;
• The fifth character is 0 (zero);
• The last 6 characters are used to identify the particular branch.

For example, the IFSC of HSBC India, the main branch in New Delhi, is HSBC0110002.

Main Differences between SWIFT and IFSC Code

SWIFT and IFSC are two different codes that ease the money transfer. SWIFT is used for international transfers, while IFSC is used for domestic transfers.

Society for Worldwide Interbank Financial Telecommunication:

• It has from 8 to 11 characters that are used to identify banks and financial institutions worldwide;
• Used for international money transfers and is required to receive funds from abroad.

Indian Financial System Code:

• Has 11 characters that are used to identify banks and financial institutions in India;
• Used for domestic money transfers and is required to receive funds within India.

Conclusion

The SWIFT and IFSC are both crucial systems used in the banking industry. SWIFT identifies specific banks and financial institutions when sending international payments, while IFSC identifies individual branches in India. While both systems are essential for carrying out banking transactions, they serve different purposes.