Amongst the various instruments available in the market, cheques are the most popular ones. They are a traditional method of banking and making money transactions. With the technological advancements and upgrading of the systems, people now days prefer using the mobile or online transactions but cheques serve various other purposes apart from being just transaction instruments. For instance, cancelled cheques are most prevalent in producing proof of account holding in any particular bank.
WHAT IS A CANCELLED CHEQUE?
As the name suggests, a cancelled cheque is a blank cheque on which ‘Cancelled’ is written by hand and two diagonal lines are drawn from one end to other. The word ‘Cancelled’ is written between those two lines. This cheque is not used for withdrawing money being cancelled. It serves as a proof of account holding in the name of a particular user.
HOW TO CANCEL A CHEQUE?
All you need to do is take a blank cheque leaf out of the cheque book, draw two diagonal lines across it from bottom-left to top-right and in between those two lines, write ‘CANCELLED’. Please make sure that you do not sign the cheque. The cheque leaf contains your details which are:
• Account holder’s name
• Account number
• Bank branch name
• Branch address
• MICR code
• IFSC code
These details are sufficient to be submitted as proof.
WHERE IS A CANCELLED CHEQUE USED?
There are a number of places where you will be required to produce your account details or bank details, rather than providing them in written which is not even an authenticated proof, a cancelled cheque serves the purpose. Following are some instances which would require you to produce a cancelled cheque-
1. Applying for Loan
If you apply for any loan in a bank or financial institution, you will be asked to submit a cancelled cheque. This may a car loan, home loan, education loan, personal loan etc.
2. Opting for EMIs at a store
If you happen to buy any consumer durable product which has the option of EMI with it and you opt for the EMI then you will be required to submit a cancelled cheque of your bank. This cancelled cheque will be asked by the financial provider through whom you will get your product financed.
3. While investing
If you planning to start investing or already are an investor and need to get your KYC done, the investment platform you choose to invest from will ask you for a cancelled cheque as proof of account. This helps in verifying your account details.
4. While withdrawing PF offline
If you wish to withdraw your provident fund offline, you will be required to produce and submit a cancelled cheque tagged along with other required documents. This is required in order to verify your account details.
5. Electronic clearance service
If you wish to register for an electronic clearance service where the desired amount is deducted automatically from the bank amount, a cancelled cheque will be required to verify the account details.
6. Purchasing an insurance policy
While purchasing an insurance policy, the company will ask for a cancelled cheque to verify the account details.
7. Option for NPS
If you have opted for NPS tier II account then you will be required to submit a cancelled cheque.
8. Opening a Demat account
To hold their shares electronically, investors required a Demat account. A cancelled cheque is required to open a Demat account along with other KYC documents.
FAQs ON CANCELLED CHEQUE
Q1. How to cancel a cheque?
To cancel a cheque, simply draw two lines across the cheque and write ‘cancelled’ in between.
Q2. Do I need to sign a cancelled cheque?
No, do not sign a cancelled cheque.
Q3. What if I misplace a cancelled cheque?
Although it is advisable to be careful while handling all your financial instruments but if you happen to lose or misplace a cancelled cheque, you need not to worry as it cannot be used to withdrawing money.
Q4. What colour of pen is right to cancel a cheque?
Always use blue or black ball point pen while canceling or signing a cheque.
Q5. What information does a cancelled cheque contain?
A cancelled cheque contains information regarding the name of account holder, account number, MICR code, IFSC code, branch name, branch address.
Q6. I did not write ‘Cancelled’ on the cheque. Will it be considered cancelled?
Only drawing lines do not qualify as cancelled cheque. You must write cancelled.