IBAN for standardized banking account numbers

RBI is targeting to standardize the banking account numbering in India. As of now, each bank devise its own account numbering structure varying in length, pattern and composition. This has led to a situation where even basic validations on account numbers is not possible and this leads to incidences of credit going to wrong beneficiary, especially in an STP (straight-through-processing) environment handling huge volumes of transactions.

One of the options to achieve standardization in account numbers is implementation of IBAN which will bring uniformity in the account number across banks. RBI is planning to use IBAN for Uniform Account Number structure in India.

IBAN (International Banking Account Number) is an international standard for identifying bank accounts across national borders. It was originally adopted by the European Committee for Banking Standards, and was later adopted as an international standard under ISO 13616. Usually, IBAN coupled with SWIFT codes is used for making International Transactions. However, IBAN can also be used for domestic transactions as well and this is what RBI is targeting to. Introduction of IBAN will do away with the need for specifying the IFSC code of the banks during electronic transfer as the IBAN code will contain the bank, branch as well as the user account number.

IBAN’s primary purpose is to:

1. facilitate domestic/cross-border inter-bank electronic payment
2. avoid routing errors in domestic/cross-border payments
3. facilitate straight through processing
4. making payment in a reliable manner as remitter can validate the beneficiary account number

IBAN mainly consists of two parts – first part consists of country code (2 characters) check digit (2 numeric) bank ID (4 characters) and second part consists of BBAN which can be decided by banks (max up to 26 characters). Thus, IBAN can be of maximum 34 digits with BBAN up to a maximum 26 characters long. However, the length of Basic Bank account Number (BBAN) and IBAN should be uniform across the banks in the country.