A cancelled cheque serves as proof that you have an account with a particular bank. It is important to know about this document as it comes in handy in numerous situations. In fact, you also have to submit it when you are shopping for items on EMI. You need to do this to assure the financier that you have a valid bank account.
For a deeper understanding on why a cancelled cheque is necessary, how you can write one and when it comes handy, read on.
What is a cancelled cheque?
A cheque features your bank account number, cheque number, IFSC code, and the MICR (Magnetic Ink Character Recognition) code. In short, every leaf of your cheque book has your account details, and thus, by issuing a cheque you can authorise someone to transact with your account. However, issuing a blank cheque is hazardous, as someone can easily enter an amount to retrieve money from your account. In order to prevent the misuse, you must cancel the cheque.
While issuing a cancelled cheque, always remember to write the word ‘cancelled’ on it. Once you do this and cancel the cheque, you or anyone else is unable to use it for any transactions. However, the details mentioned on the cheque remain valid and you can use it to process various finance-related applications.
How to write a cancelled cheque
Now that you know what a cancelled cheque is, here is how you can make a cancelled cheque and use it as a document for processing your applications. To write a cancelled cheque, you just need to follow the below-mentioned two simple steps.
- Pick a fresh cheque to cancel it. Ensure that you do not put a signature on it
- Draw two parallel lines across the cheque
- Write the word ‘cancelled’ in between the lines in block letters
- Ensure that the parallel lines do not cover details, such as account number, account holder's name, MICR code, name, and branch address of the bank, on the cheque
Why and when is a cancelled cheque required
A cancelled cheque is required for a number of reasons in India. Firstly, it is used as proof of payment in various financial transactions such as loan applications, insurance policies, and credit card applications. It serves as evidence of the account holder's name, bank details, and signature. It is also used as a means of providing bank account details to third parties, such as for direct deposit of salaries and dividends. Additionally, cancelled cheques are used for setting up automatic bill payments, as it provides authorization for the service provider to deduct the required amount from the account holder's bank account. Therefore, it is important for individuals to keep a record of cancelled cheques to ensure smooth financial transactions and to avoid any disputes in the future.
- For Know Your Customer (KYC): When you need to do the KYC for making investments in the stock market, mutual funds, or other financial schemes, a cancelled cheque is required.
- EPF: It is a must to provide a cancelled cheque for withdrawing funds from your Employee Provident Fund (EPF) account.
- ECS: To enable Electronic Clearing Service (ECS) for your bank account, you need to provide a cancelled cheque as proof of your bank account details.
- NBFC: A cancelled cheque is often required by banks or Non-Banking Financial Companies (NBFC) to process Equated Monthly Installments (EMIs) for loans or credit amounts.
- DEMAT: For opening a Demat account, you need to provide KYC documents such as proof of identity and address, along with a cancelled cheque as proof of your bank account details.
- Insurance: While purchasing an insurance policy, submitting a cancelled cheque serves as proof of your bank account, which is necessary for the insurance company to process premium payments and other financial transactions.
Various uses of a cancelled cheque
The process of making a cancelled cheque is very simple. There are numerous reasons for which you will need to issue a cancelled cheque. So, let us look at some of the common applications that requires you to submit this document.
When you buy high-value products on EMI, you need to submit a cancelled cheque to your financier to verify your bank details. For instance, Bajaj Finserv requires you to submit a cancelled cheque while applying for the Bajaj Finserv EMI Network Card to shop from the Bajaj Finserv EMI Network. Once you get the card, you can avail a pre-approved loan of up to Rs. 2 lakh to purchase electronics, home appliances, groceries, apparel, accessories, or furniture. You can shop from any of the 1.5 lakh+ partner sellers online or offline. You can also convert your purchase into No Cost EMIs and repay the amount over a flexible tenure ranging from 1 to 60 months.
You need to submit a cancelled cheque while applying for a loan. To register for Electronic Clearance Service (ECS) for any loan or credit purchases, you need to submit a cancelled cheque, so that the financier can directly deduct the amount from your account every month on a specified date.
You may also have to submit a cancelled cheque when investing in mutual funds, provident funds, or an insurance policy. Once again, you need to do this only when you want to link your bank account with your investment and want payments to be deducted from your bank account automatically.
Risk Associated with a cancelled cheque
Many people worry about the possibility of fraudulent withdrawals or misuse when it comes to cancelled cheques. However, it is important to understand that no such transaction can occur as cancelled cheques are legally cancelled. One should not worry about any misuse of the cheque, but it is important to follow the norm while cancelling cheques. Always use a blue or black ink pen while cancelling cheques as banks may reject those cancelled in other colours. Remember, you do not need to add your signature on the cancelled cheque since it is only used to verify banking details. Lastly, make sure to write the word 'Cancelled' after marking parallel lines on the cheque to avoid any issues later on. Forgetting to do so can lead to rejection of the cheque by the bank.
What is the difference between a stop payment and a cancelled cheque
The cheque doesn’t have the word “Cancelled”.
There is a written word "CANCELLED".
It is used to stop a payment in case you have insufficient funds against a cheque, when your signed cheque is misplaced or if you want to stop a payment immediately for any other reason.
It is just used as evidence of your bank account. provides information such as the account holder's name, account number, the bank's name, IFSC code, MICR code, and the branch's address.
The bank may charge a small fee when you use a STOP payment cheque.
There is no fee involved.
The cheque is used for holding a transaction.
The bank can’t use it for any transaction or to stop any transaction.
The cheque has a signature and is used as an order to stop payment.
Signing the cancelled cheque is not required.
Now that you know how to issue a cancelled cheque and its uses, you can enjoy a smoother banking experience. You can also get the benefits of shopping on shopping on No Cost EMIs just as easily from the Bajaj Finserv EMI Network!
In conclusion, cancelled cheques play a crucial role in financial transactions in India. While they may seem like a simple piece of paper, they serve as proof of payment and can be used as evidence in case of any disputes arising from the transaction. It is recommended that individuals keep a record of all cancelled cheques to ensure that they have evidence of their financial transactions. Moreover, it is important to remember that a cancelled cheque is not the same as a lost or stolen cheque, and appropriate measures should be taken in case of any such incidents. Therefore, it is crucial to understand the importance of a cancelled cheque in India and to keep them safely for future reference.
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