Sunday, February 8, 2015

SWIFT codes

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The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a secure, reliable, standardized network (SWIFTNet network) that facilitates financial institutions to transfer and receive financial transaction information worldwide.

It is a standard format of Business Identifier Codes (BIC) for both financial (BIC) and non-financial (known as Business Entity Identifier, or BEI) institutions, approved by International Organization for Standardization (ISO) - ISO 9362.

Why SWIFT code?
Financial Institutions need to have an unique identifier code, so that they can be uniquely identified and facilitate transactions (like a PIN code, need to know the destination and source of the transaction being made).
Think how many banks are their in the world, and how many branches in each bank. And also, different country has its own standard for financial transaction. Therefore it is necessary to make a common standard, which will be followed by financial institutions situated in different countries. For this purpose of international wire transfers or worldwide financial communication, SWIFT was founded in Brussels in 1973, supported by 239 banks in 15 countries.

SWIFT code
The SWIFT code is of or 11 characters - (AAAA BB CC DDD)
  • First 4 characters - Bank codes (only alphabets)
  • Next 2 characters - Country codes (only alphabets) (ISO 3166-1 followed)
  • Next 2 characters - Location code (alpha-numeral)
  • Last 3 characters - Branch code (alpha-numeral) (optional, if left blank, or 'XXX' then means primary office, i.e., head office)
Note that, 8 character SWIFT code (last 3 characters of Branch code is absent, or 'XXX') is intended for primary office of the bank, whereas 11 character is intended for particular bank branches.

India in SWIFTNet
India was the 74th country to join the SWIFT network on December 2, 1991. It has the following features -
  • It is available worldwide, 24x7
  • standard message formats for transactions, that enable members to avoid language and interpretation problems and permit the automated handling of messages
  • delivery of a message is very 'swift'
  • ensures a high-level of security, while transmitting messages
  • assumes financial liability for the accuracy, completeness and timely delivery of all validated messages
SWIFT Network
There is a SWIFT gateway for each country, known as SWIFT Access Point (SAP). Individual user's terminals are connected with this SAP, through leased lines with Public Switched Telephone Network (PSTN) as backup
The SAPs are connected to the Regional Processors, which are connected online to mother operating centers in USA and Netherlands, from where the messages are distributed to the destination addresses indicated in each SWIFT message.

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