How to create a cancelled cheque?' is a common question, as many people are unsure about it. Cancelled cheques are frequently requested in various financial transactions for verification purposes. By learning how to write one, you can ensure that your financial dealings proceed smoothly and securely.
What is a cancelled cheque?
A cancelled cheque is voided by the issuer, often by writing "CANCELLED" across it. Though unusable for withdrawals, it contains crucial details like the account holder's name, account number, and MICR code. This makes it valuable for verification purposes, such as setting up electronic payments, verifying account ownership, and processing certain financial transactions.
How to write a cancelled cheque?
1. Take a fresh cheque leaf: Start with an unused cheque from your chequebook.
2. Draw two parallel lines: Using a pen, draw two diagonal lines across the cheque.
3. Write CANCELLED: Clearly write the word CANCELLED between the diagonal lines. Ensure it is legible and covers a significant portion of the cheque.
4. Do not sign the cheque: Signing is not necessary for a cancelled cheque. However, if you choose to sign, do so within the designated signature area.
What are the uses of cancelled cheques?
1. Bank account verification: It is required when starting a new Fixed Deposit or other investments and while applying for a loan, as it confirms your bank account details. This step helps ensure the accuracy of the information provided.
2. Electronic Clearing Service (ECS): It is necessary for authorising automatic transfers of utility bills, loan EMIs, and Mutual Fund investments. It simplifies recurring payments, making financial management easier.
3. Income tax filing: It is used to verify your bank account details for refunds. Providing accurate bank details ensures timely and correct refund processing.
4. Direct debit authorisation: It is required for setting up automatic payments for services. This authorisation facilitates seamless, automated bill payments.
5. Salary processing: Employers may request a cancelled cheque to ensure correct salary crediting. This helps avoid errors in salary deposits, ensuring employees are paid accurately and on time.
Why is a cancelled cheque required?
- KYC compliance: Banks and financial institutions use cancelled cheques for Know Your Customer (KYC) verification to prevent fraud. This helps in establishing the authenticity of the account holder's details.
- Loan applications: Lenders require a cancelled cheque to validate your bank account details for disbursing loan amounts. It ensures that the loan amount is credited to the correct account.
- Insurance policies: Insurance companies often ask for a cancelled cheque when setting up premium payments or processing claims. This is to verify the account from which payments will be deducted or to which claims will be credited.
- Investment purposes: Mutual Funds and stock market investments may require a cancelled cheque to verify your bank account for transactions. This verification is crucial for the seamless transfer of funds during investments or withdrawals.
Also Read: Different types of Cheques in banking
FAQs
1. Is a signature required on a cancelled cheque?
No, a signature is not mandatory on a cancelled cheque. The primary purpose is to provide bank details without allowing the cheque to be cashed.
2. What can I use instead of a cancelled cheque?
In some cases, a bank statement or a copy of the front page of your passbook can be used instead of a cancelled cheque for verifying bank account details. However, this depends on the requirements of the institution requesting the verification.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
