What is a Cancelled Cheque and How to Write it in the Right Way?

What Is A Cancelled ChequeAndHowToWriteItInTheRightWay_1

Banks or financial institutions may require cancelled cheques in order to confirm the accuracy of a user’s banking information. These cheques must be submitted as evidence of a valid bank account. It is important to understand what a cancelled cheque is, how to properly fill one out, and when it may be requested in order to properly use them for financial matters.

What is a Cancelled Cheque?

A cancelled cheque is a type of crossed cheque that has two parallel lines drawn across it and the word “CANCELLED” written between the lines. This makes it impossible for anyone to use the cheque for unauthorized financial transactions.

However, cancelled cheques still contain sensitive information, such as bank account numbers, account holder’s name, cheque number, MICR code, and IFSC code, that could potentially be stolen or misused through cybercrime. As a result, it is important to handle cancelled cheques with care and ensure that they are stored and disposed of securely.

How to Write a Cancelled Cheque?

When submitting a cancelled cheque to a bank or non-banking financial company (NBFC), it is important to follow the instructions provided.

  • Take a fresh cheque (Do not write additional information on the cheque, such as the Payee’s name, amount, signature, and so on.)
  • Draw two parallel lines across the cheque 
  • Write “CANCELLED” in capital letters between the 2 parallel lines
  • Make sure the parallel lines do not cover any crucial information such as the account number, IFSC code, MICR code, account holder’s name, bank’s name, or address

Read More: How to Write a Cheque – a Step by Step Guide to Follow

When is a Cancelled Cheque Required?

A cancelled cheque is required for a variety of reasons, as listed below:

  • For KYC completion: A cancelled cheque is a cheque that has been paid by a bank and bears the notation “cancelled” across its face. It is considered the most important document to submit when making an investment in the stock market, mutual funds, or other financial schemes. 
  • For EPF withdrawal: It is required to provide a cancelled cheque in order to withdraw funds from your Employee Provident Fund (EPF) account. 
  • For electronic clearance service: The Electronic Clearing Service (ECS) is a method of transferring money from one bank account to another. In order to enable this service on your bank account, you will need to provide a cancelled cheque to your bank. This is a necessary requirement for activating the ECS facility on your account, which will allow you to easily and securely transfer funds to other accounts.
  • For EMIs: Before finalizing your Equated Monthly Installments (EMIs) for a loan or credit amount, your bank or Non-Banking Financial Company (NBFC) will ask for a cancelled cheque. This is a necessary requirement in order to process your EMI payments. A cancelled cheque is often required as proof of your bank account, which will be used to directly debit the EMI amount from your account each month.
  • For Demat Account:In order to open a Demat (Dematerialized Securities) account, you will need to provide certain Know Your Customer (KYC) documents, including proof of identity and proof of address. Along with these documents, you will also be required to submit a cancelled cheque. A cancelled cheque is often required as a proof of your bank account, which will be linked to your Demat account for the purpose of buying and selling securities. 
  • For Insurance: When purchasing an insurance policy, you will be required to provide proof of your bank account. One way to do this is by submitting a cancelled cheque. A cancelled cheque serves as evidence of your bank account, which may be necessary for the insurance company to process premium payments and other financial transactions related to your policy.
FAQs

How to cancel a cheque?

Strike two parallel lines across the cheque and write “Cancelled” in between those parallel lines.

When does one require a cancelled cheque?

Cancelled cheques are required in the following cases:
  1. For KYC completion
  2. To open a Demat account
  3. To invest in an insurance policy
  4. To process the EMI payments
  5. To withdraw EPF amount

Is it possible for my bank to cancel my cheque?

No, your bank cannot cancel your cheque on your behalf. It is you who has to cancel the cheque. In case you do not have a cheque, your bank will provide you with the same so that you can cancel it for further processing.

Can I sign a cancelled cheque?

You should not sign and/or write any kind of information like a signature, amount, payee’s name and others on a cancelled cheque.

What are the risks associated with cancelled cheques?

Although cancelled cheques are not dangerous, they do contain information such as the account holder’s name, bank name, IFSC code, and MICR that can be misused. As a result, regardless of the situation, you should exercise caution when handling a cheque.

Can I cancel the cheque using red ink?

You should always use a black or blue pen to cancel/write a cheque, no other colours are acceptable by the banks, NBFC and others.

Can I block a cheque leaf online?

Yes! You can block your cheque by contacting your bank or by logging into your bank’s official website.
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