Understanding Cancelled Cheque: Cheque is an important financial instrument. In many instances, it becomes necessary to submit Cancelled Cheques.
In this article, We will understand the significance of a Cancelled cheque. How to write a Cancelled cheque, Purpose, Usage and precautions related to it.
Table of Contents
What is a Cancelled Cheque?
A Cancelled cheque is a cheque, which is crossed by two parallel lines drawn across layout and the word “CANCELLED” is written between those parallel lines.
A cancelled cheque should not contain Signature on it.
Cancelled cheque is used to gather details related to your account such as Account Number, Account name, MICR code, IFSC, Bank name and Branch address.
Purpose of a Cancelled Cheque?
During certain financial activities like purchasing Mutual Funds or setting up Electronic Clearing Service (ECS), it is necessary to provide our bank details. This may be required even if we don’t have an account or relationship with that specific bank. If there is an error in filling out the form, it can lead to significant financial losses.
A cancelled cheque is required to ensure and verify the accuracy of the bank details provided on the form, A cancelled cheque used as evidence of our bank account and helps verify that all the information on the form is correct. It acts as a proof that the provided bank account exists and can be trusted.
Need of Cancelled Cheque | Use of cancelled cheque
A Cancelled cheque is used in many instances mentioned below
- Setting up Electronic Clearing Service (ECS) : An Electronic Clearing Service (ECS) is a method by which money can be debited from one account and transferred to another bank account at any specific date. For setup of ECS facility, you need to submit a cancelled cheque.
- KYC completion : Whenever you are investing in Mutual Funds or Stock market. Cancelled cheque is asked to verify that the bank details provided by the customer are correct and the account is associated with the person who is investing. This requirement is in accordance with Know your Customer (KYC) guidelines.
- EPF withdrawal : Cancelled cheque is required for withdrawing funds from EPF account.
- EMI setup : When you take any loan, the bank asks for a Cancelled cheque as a proof of your account and details available on it are used for EMI auto debit setup.
- Demat Account : While opening any Demat account, a cancelled cheque along with your KYC is required. Cancelled cheque is the proof of your account which will be linked with your demat account for buying and selling securities.
- Insurance : Cancelled cheque is also required at the time of purchase of Insurance policy to verify your bank details for future transactions.
- Settlement of claim : While settlement of any insurance claim, or deceased claim in Banks. A copy of the cancelled cheque is required from claimant to transfer the funds.
How to write a Cancelled cheque?
Draw two parallel lines diagonally across the layout and write the word “CANCELLED” between these two lines. Ensure that bank details such as account number, Account name, MICR code, IFSC code does not get strike off while writing.
It is advised that the word “CANCELLED” should be written in capital letters.(not mandatory)
Very Important : Do not do signature on cancelled cheque, Signature sample can be potentially used by fraudster to copy and forge your signature.
Cancel Cheque image | Cancel Cheque photo
Precaution while writing a cancelled cheque
- Use Dark Ink, preferably black or blue to write a cancelled cheque, It is always advised to use your own pen to write and sign any financial instruments. Fraudsters can use erasable pens to do any fraud with your cheque.
- Write down cancelled cheque details before handing it over to someone.
- You can also take a photocopy or take a photo of the cross cheque before handing it over to someone.
- Handover cancelled cheque to the genuine person only.
- Maintain a record of all Cancelled cheques issued by you,Record must contain the details of the recipient name, Date and purpose of issuance.
Alternative of Cancelled Cheque : Following documents can be used in place of Cancelled Cheque
- Bank Passbook – (Mainy First page of bank passbook, which contains information about your Account number, Account name, MICR, IFSC, Bank branch address etc
- Bank statement – (Statements in which your Account number, Account name, MICR, IFSC, Bank branch address are mentioned)
- Photocopy of Cheque
FAQ – Cancelled Cheque
How can I make a Cancelled cheque?
Draw two parallel lines diagonally across the layout and write the word “CANCELLED” between them. Do not include a signature.
Where is it mandatory to write a cancelled cheque?
In many financial transactions, providing a cancelled cheque is necessary to verify bank details. It’s a common requirement for activities like ECS setup, KYC completion, and more.
Why is a cancelled cheque used?
A cancelled cheque is used to verify and ensure the accuracy of bank details provided in financial transactions. It serves as proof that the provided bank account exists and can be trusted.
Is it safe to give a Cancelled cheque?
Yes, it is generally safe to provide a cancelled cheque. However, precautions such as using dark ink and handing it over only to genuine persons should be taken.
What is the penalty for a cancelled cheque?
There is no specific penalty for a cancelled cheque. However, it’s crucial to handle it securely to prevent any fraudulent use.
How many times can we use a Cancelled cheque?
A cancelled cheque can be used multiple times, but it’s recommended to exercise caution and keep a record of issued cancelled cheques.
Can you cash a Cancelled cheque?
No, a cancelled cheque cannot be cashed. It is marked as “CANCELLED,” indicating that it is not valid for financial transactions.
Is a signature required on a cancelled cheque?
No, a cancelled cheque should not contain a signature. Adding a signature could pose a risk of signature forgery by fraudsters.
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