In today’s internet era and intensive online marketing, almost everything is availed with a few clicks online. Like all business sectors, banking too has been providing various services online, making the lives of most people easier when it comes to daily transactions. This includes Fixed Deposits, Savings Account and Loans. While online banking is growing exponentially, there are some aspects of banking that need to be taken care of in a traditional way.
Issuance of cancelled cheques is one such process that still has to be done manually. While everyone is aware of payment via cheques, a lot of online banking customers continue to have doubts about cancelled cheques. Read on to find out all about the cancelled cheque.
What is Cancelled Cheque?
A cancelled cheque refers to any cheque that has strike marks on it with the words ‘cancelled’ written across. A cancelled cheque is considered to be proof that an individual holds an account with the bank. From the withdrawal of EPF funds to set up an Electronic Clearance Service from the account, a cancelled cheque is required in many cases.
How to Cancel a Cheque?
To cancel a cheque, you need to strike two lines across the cheque and write the word “Cancelled” across it. There is no need to sign the cancelled cheque. It only works as a proof that you have an account in the bank. There is the account holder’s name, branch name and address, account number and MICR Code on the cheque which is enough to submit it as a proof.
Why is a Cancelled Cheque Needed?
There are several places where you will be required to produce your account details or bank details, rather than providing them in writing 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-
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 be a car loan, home loan, education loan, personal loan etc.
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.
While investing - If you plan 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.
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 to verify your account details.
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.
Purchasing an insurance policy - While purchasing an insurance policy, the company will ask for a cancelled cheque to verify the account details.
Option for NPS - If you have opted for an NPS tier II account then you will be required to submit a cancelled cheque.
Opening a Demat account - To hold their shares electronically, investors require a Demat account. A cancelled cheque is required to open a Demat account along with other KYC documents.
Issuance of Cancelled Cheque
If you want to furnish a cancelled cheque, all you need to do is draw two parallel lines across the cheque and write ‘Cancelled’ in between the two lines. A cancelled cheque doesn’t require your signature. It gives details such as account number, account holder’s name, MICR code, name and branch address of the bank.
While no one can withdraw money from your account using a cancelled cheque, fraudulent activities using a cancelled cheque have happened in the past. Therefore, it makes sense to be very careful when you issue a cancelled cheque and make sure that the person you are handing it over to is extremely trustworthy.
While issuing a cancelled cheque, you must remember to write the word ‘cancelled’ on it. Once you do this and cancel the cheque, no one can use it for any transactions. However, the details mentioned on the cheque remains valid and can be used to process various finance-related applications.