Download NeoGrowth App
Table of Contents
What is a Cheque?
A cheque is a promissory note that instructs a bank to pay a specific quantity from the drawer’s bank account to whomever the cheque is issued to or to the specified person or the cheque bearer.
With technological advancements, transactions may now be completed digitally with a few clicks. Cheques, on the other hand, are still widely used by people who are skeptical about internet transactions or find them inconvenient.
There are three participants to a check:
- Drawer of a cheque: The person who signs it or tells the bank to pay a specific amount of money via a cheque.
- Drawee of a cheque: The bank that has been ordered to pay the indicated amount according to the cheque.
- Payee: The payee is the person to whom the bank is required to make a payment.
What is a Cancelled Cheque?
Two lines are crossed over a cancelled check, and the word “cancelled” is written on it. It demonstrates that the person has a bank account, and the cheque can’t be used to withdraw money. It only serves as proof that you have a bank account. Furthermore, even though a cancelled cheque cannot be used to withdraw funds from the drawer’s account, it contains additional information such as the account holder’s name, branch name and location, account number, MICR code and IFSC code on the cheque.
Aside from that, the cheque does not require any signatures or writing. You are being requested to cancel the check to prevent it from being utilized in an illegal manner.
Let’s look at some of the other aspects of the phenomenon now that we’ve defined what a cancelled cheque is.
How to write a cancelled cheque?
When cancelling a check, you must be cautious, as this can be misused. To write a cancelled check, follow these steps:
Step 1: Take a new check from the cheque leaf you want to cancel. On the cheque, do not sign anywhere.
Step 2: Draw two parallel cross lines across the cheque.
Step 3: In capital letters, write “CANCELLED” between those two lines.
It’s important to note that the parallel lines you draw across the cheque leave out important information like the account number, account holder’s name, IFSC code, MIRC code, name, and branch address of the bank where the account exists.
If you’ve already made a mistake while writing a cheque, you can still cancel it by going back to Step 2.
Even though no one can withdraw money from a cancelled cheque, there are fraudsters who can seize the opportunity. Therefore, it’s crucial not to sign a cancelled cheque when giving it to someone. To be on the safer side, make sure you hand it over to the correct person in charge of collecting it.
Also Read: GST in India: About GST, Its Advantages and Disadvantages
Uses of a Cancelled Cheque
Although a cancelled cheque cannot be used to withdraw money, it can be utilized for other purposes. A cancelled cheque can be used for a variety of things, including:
1. Know Your Customer (KYC):When investing in mutual funds or the stock market, you can use cancelled cheques to validate your KYC. A cheque contains important information such as the account holder’s name and account number, as well as the name and branch address of the bank where the individual maintains an account
2. Equated Monthly Installments (EMI): EMI stands for equated monthly installment, which refers to the monthly repayments you make on a loan. It could be a car loan, home loan, business loan, MSME loan, or personal loan. To complete the procedures for your EMI, banks may ask for a sample cancel cheque.
You can now avail collateral-free business loan up to 20 lakhs with NeoGrowth with a customizable repayment option starting from just Rs 250 daily. T&C*
For more details call us at 9820655655 or 18004195565.
3. ELECTRONIC CLEARANCE SERVICE (ECS):The Electronic Clearing System (ECS) is a system for electronically transferring money from one bank account to another. If you set up an ECS from your account, money will be withdrawn from your account on a monthly basis. The bank will need your cancelled cheque for you to avail this facility.
4. DEMAT Account: Individuals can utilise a DEMAT account to keep shares in digital form. If you want to open a DEMAT account, you’ll need to submit a cancelled cheque along with additional KYC documents like proof of identification, address, etc.
5. Withdrawal of Employee Provident Fund (EPF):You must produce a cancelled cheque to withdraw funds from your EPF account. It is required when withdrawing money from the EPF to verify the account details of the person withdrawing.
6. Insurance Policies: When applying for an insurance policy, some companies may need a blank cancelled cheque.
Related Blog: PUBLIC PROVIDENT FUNDS ARE A SMART INVESTMENT
In a Nutshell
A cancelled cheque prevents unauthorized access to your bank account. Your bank account number, account holder’s name, IFSC code, MICR code, and bank name are all stated on a cancelled cheque. If you sign a blank cheque, scammers may be able to duplicate it. If someone mandates it, obtain a statement or declaration supporting the requirement for a signature on the cheque leaf. Be cautious while cancelling a cheque and make sure you give it to the right person to minimize the chances of fraud.
We hope that this article has provided sufficient information on what a cancelled cheque is and how to write one & the reasons for requiring a cancelled cheque.
