All You Need to Know About Cancelled Cheques
Digital transactions in the recent years have transformed the entire banking services. With the advent of net banking, credit cards, debit cards and e-wallets, the traditional manual bank work has declined. However, in some of the pure banking processes, a cancelled cheque is a requisite for verifying your bank account. If you are still wondering why a cancelled cheque is used, read on to know the answers.
What is a cancelled Cheque?
A cancelled cheque is simply a cheque leaf on which two parallel lines are drawn and the word ‘Cancelled' written in between them. Nothing else should be written on a cancelled cheque and it need not have your signature on it. However, the cheque will consist of your bank account number, MICR code and cheque number which can be used for the reference of concerned persons.
The purpose of a cancelled cheque is that it should not be misused by anyone and no one can withdraw money without your knowledge.
Uses of a Cancelled Cheque
Below is the list of areas where a cancelled cheque is required for verification.
Opening Bank Accounts: If you want to open a savings or current bank account, you need to submit a cancelled cheque to complete the process.
Know Your Customer(KYC): A cancelled cheque has become essential for KYC procedures and documentations. Investment plans like mutual funds, stocks require KYC documents in which a cancelled cheque submission is mandatory.
Electronic Clearance Service (ECS): Deduction of money from your account using Electronic Clearance Service require a cancelled cheque.
EMIs: A cancelled cheque is a requisite for finalising EMI payments for various types of loans such as home, auto, education and business loans.
Insurance: Submission of a cancelled cheque is mandatory on purchase of insurance policies like health, endowment, money back etc.
Demat Account: A cancelled cheque needs to be submitted to the stock brokerage while opening a demat account which is essential for stock trading and investments.
EPF Withdrawal: To withdraw your Employee Provident Fund (EPF), you need to submit a cancelled cheque to the organisation you worked with or for Employee Provident Fund office.
These are the above areas where you need to issue a cancelled cheque to complete the process. Though a cancelled cheque cannot be misused, there have been instances in the past of cheque fraud. See to that you cancel the cheque carefully and submit it in person to minimise the risks.