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
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.
How to cancel a cheque?
When does one require a cancelled cheque?
- For KYC completion
- To open a Demat account
- To invest in an insurance policy
- To process the EMI payments
- To withdraw EPF amount