Question

MICR code is used for ............... .

• A. core banking solution
• B. electronic funds transfer
• C. electronic clearance of cheques
• D. cheque truncation services

Hint:

Remember: MICR = Faster cheque clearance with special ink and unique codes.

Answer 1

The Correct Option is C

MICR stands for Magnetic Ink Character Recognition.
A MICR code is a unique code printed on the bottom of cheques using special magnetic ink and technology.
This code usually consists of 9 digits — the first 3 digits represent the city code, the next 3 represent the bank code, and the last 3 digits represent the branch code.
The main purpose of MICR is to speed up and simplify the processing and clearance of cheques by enabling automatic reading and sorting of cheques by machines.
This reduces manual errors, ensures accuracy, and allows banks to clear large volumes of cheques efficiently through the Electronic Clearing System (ECS).
While cheque truncation services also deal with digital processing, the MICR code’s primary role is in the electronic clearance stage.
Core banking solution and electronic funds transfer do not directly use MICR for processing transactions.
Therefore, option (C) electronic clearance of cheques is the correct answer.