What is a Cancelled Cheque
A cancelled cheque is a cheque that has been marked with two parallel lines and the word 'Cancelled.' It is used for various banking and financial services as proof of account ownership. Learn more about its uses, and how to cancel a cheque safely.
The reason why you are asked to cancel the cheque is to make sure that it is not misused in any manner. Read on to know more about the uses of a cancelled cheque.
When Do You Need a Cancelled Cheque?
Many times you would have often come across the term 'cancelled cheque' while transacting in the bank. However, the use of cancelled cheques is not limited to banking transactions. Here we list out some of the common purposes of a cancelled cheque:
- You may be required to provide a cancelled cheque while opening a savings account or current account in the bank.
- Setting Electronic Clearance Service (ECS) from the account.
- You may require a cancelled cheque for KYC purpose. Nowadays, most investment firms require you to submit a cancelled cheque as part of KYC.
- For withdrawal of EPF funds.
- Financial lending organizations often ask borrowers for a cancelled cheque to process their loan request.
- When purchasing insurance policies such as endowment plan or money back plan, you may be asked to submit a cancelled cheque.
- You will be required to submit a cancelled cheque when opening a demat account.
How to Cancel a Cheque?
You can simply cancel a cheque leaf by drawing two parallel lines over it and writing "cancelled" in between the lines. You should not sign on a cancelled cheque. A cancelled cheque leaf can provide your account information such as account number, your name (as in the bank account), MICR code, bank name, and bank branch. Even though fraudulent activities using cancelled cheques are too rare, you should still make sure that the person or institution to which you hand over your cancelled cheque is highly reliable.
Conclusion
A cancelled cheque is a method to ensure that no one can access your account in a fraudulent way. A cancelled cheque still contains information such as your bank account number, account holder's name, IFSC code, MICR code, name of the bank, etc. Always make sure that you do not fix your signature on a cancelled cheque, otherwise it might become easier for fraudsters to replicate the same. However, in case someone mandates the requirement of a signature on the cheque leaf obtain, a statement or declaration in support of the same.
FAQs on Cancelled Cheque
- What is a cancelled cheque?
A cancelled cheque is any check which has been crossed with two parallel lines and the word ‘cancelled’ is written upon it. A cancelled cheque is proof to show that an individual has an account in a particular bank.
- What is the purpose of a cancelled cheque?
A cancelled cheque has multiple purposes such as for bank transactions, for opening a savings or current account in a bank, for setting up electronic payments, for processing loan requests, and for Know Your Customer (KYC) procedure among other uses.
- Why do companies ask for a cancelled cheque?
Several companies require a cancelled cheque either to verify your bank account details or to set up electronic payments.
- Is giving a cancelled cheque safe?
Cancelled cheques are usually safe as the cheque leaf is crossed with two parallel lines and is clearly written cancelled on it by the issuer. However, make sure that the person or institution you're handing over the cancelled cheque to is highly reliable.
- Is it mandatory to sign a cancelled cheque?
No, it is not mandatory to sign a cancelled cheque. The cancelled cheque is used as proof for your account details. However, it also depends upon the individuals and the company’s policies as some financial institutions and banks may require you to sign a cancelled cheque.
- Can a cancelled cheque be reused?
No, a cancelled cheque cannot be reused. Once a cancelled cheque has been processed it is considered null and void for further use or transactions.
- Is a cancelled cheque mandatory for KYC procedures?
Yes, a cancelled cheque has become mandatory for KYC procedures as it serves as proof of a valid bank account. Several financial institutions seek a cancelled cheque before processing your requirements.
- Is there any alternative to a cancelled cheque?
An alternative to a cancelled cheque could be your bank statement or a copy of the front page of your passbook to verify your bank details. However, considering alternatives depends upon the requirements stated by the institutions or banks requesting the verification.
- Can a cancelled cheque be cashed?
No, a cancelled cheque cannot be cashed.
- Why are cancelled cheques required for?
A cancelled cheque is used as a document for verification of your bank details. A cancelled cheque cannot be cashed or used for transactions.
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