A cancelled cheque is any cheque which has been crossed with 2 lines and the word ‘ CANCELLED’ is written across. It is proof that the individual maintains an account with the bank.
It is written in such approach so that no other person can misuse the cheque in any way.
Although cancelled cheques can not be accustomed withdraw money, they are still assailable to cyber theft or can be misused as they contain the subsequent information Like:-
- Account number
- MICR code
- IFSC code
- Bank name
- Account holder’s name
- Cheque number
When is a Cancelled Cheque Required?
It is is required for various reasons as mentioned :-
- For Your Customer (KYC) :– Cancelled cheques are useful for different procedures of KYC while investing in mutual funds or the stock market as there are pertinent details together with the proof that the individual concerned holds an account in the bank, the name & account number of the account holder and the name and branch address of the bank in which the individual holds an account.
- EMI (EQUATED MONTHLY INSTALLMENTS ) : – EMI options are present in various loans, including car loans, education loans, home loans, etc. The bank or the company concerned would requisite a cancelled cheque for consummating the formalities to allocate such monthly payment strategies.
- DEMAT ACCOUNT :– A Demat account is used to hold shares by individuals in an electronic form and at the time of opening a Demat account, a cancelled cheque accompanying with a form for opening account & other KYC documents ,i.e:- proof of identity, proof of address, etc. have to be submitted to the stock brokerage.
- ELECTRONIC CLEARANCE SERVICE (ECS) : – ECS is an electronic mode during which funds can be transferred from one bank account to another. If you set up an ECS from your account, then there would be a deduction of cash from the account every month & for this deduction, the bank would need a cancelled cheque from you.
- WITHDRAWAL OF EMPLOYEE PROVIDENT FUND (EPF) :– It is required to be submitted while withdrawing money from the EPF to verify account details of the person who withdraws.
- OPENING A BANK ACCOUNT : – While opening a bank account, a cancelled cheque have need to be submitted for the process to be effectuated.
- INSURANCE POLICIES:– While opting for an insurance policy, several organizations need a cancelled cheque from the person willing to purchase such a policy.
Also Read:- e-Mudra Loan
How to make a Cancelled Cheque?
Ensue the mentioned instruction before you submit it to the bank or NBFC :-
- Take a recent fresh cheque (Do not write additional information such as Payee’s name, amount, signature, etc. on the cheque).
- Make 2 parallel lines over the cheque.
- Write “CANCELLED” in capital letters between the two parallel lines.
- Make sure the parallel lines do not cover decisive information such as the account number, IFSC code, MICR code, account holder’s name, bank’s name, or address.
If you want to cancel a cheque because of any error that you might have made in the cheque, you can start from step 2 of the process as mentioned above
No one will withdraw from a cancelled cheque, but various counterfeit activities can occur even while misemploy cancelled cheque. When you provide someone with a cancelled cheque, e that you do not put your signature on it, and also make sure that you entrust to the proper person in charge of collecting it to be on the secured side.
What is Cheque ?
A Cheque is a bill of exchange that you can issue to your bank, directing it to pay the particularized amount quoted in digits as well as words to the person whose name is referred on the cheque . It is also called Negotiable Instruments , covered under the Negotiable Instruments Act , 1881.
Three parties to a cheque are:
- Drawer of the cheque: The One who signs the cheque or orders the bank to pay a certain sum of amount through a cheque is called as the drawer.
- Drawee of the cheque: The bank which is ordered to pay the certain amount as per the cheque is called as the drawee of the cheque.
- Payee: The person to who the bank is ordered to pay the amount is called as the payee.
There are disparate kinds of cheque like open cheque, self-cheque, bank cheque, crossed cheque, stale cheque, cancelled cheque and many more.