What is a Cancelled Cheque

1. You may be required to provide a cancelled cheque while opening a savings account or current account in the bank.
2. Setting Electronic Clearance Service (ECS) from the account.
3. You may require a cancelled cheque for KYC purpose. Nowadays, most investment firms require you to submit a cancelled cheque as part of KYC.
4. For withdrawal of EPF funds.
5. Financial lending organizations often ask borrowers for a cancelled cheque to process their loan request.
6. When purchasing insurance policies such as endowment plan or money back plan, you may be asked to submit a cancelled cheque.
7. You will be required to submit a cancelled cheque when opening a demat account.

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How to Cancel a Cheque?

Step 1: Take a cheque leaf from your cheque book.

Step 2: Draw two parallel lines across the cheque.

Step 3: Write the word “CANCELLED” clearly between the two lines.

Step 4: Do not put your signature on the cancelled cheque.

Step 5: Remember that a cancelled cheque shows key account details such as:

1. Account number
2. Your name (as per the bank account)
3. MICR code
4. Bank name
5. Bank branch

Step 6: Hand over the cancelled cheque only to a trusted person or institution, since it contains sensitive account information.

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.

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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.