It is common knowledge that the word cheque denotes a document that a customer presents to a bank towards payment of a particular amount to the person in whose name it has been issued. Banks and financial institutions issue cheque books to their customers for these transactions. Often, in financial transactions, you may have come across the term, cancelled cheque. A cancelled cheque leaf is one on which you don’t sign or mention any amount. Cancelled cheque means that you have an account with a specific bank and is used in several scenarios, such as applying for loans, making investments or purchase of high-cost products/services.
Tear out a cheque leaf from your book.
You can simply draw a couple of parallel lines diagonally and write ‘Cancelled’ in between the two lines.
Ensure that you write ‘Cancelled’ in block letters (upper case).
Don’t sign anywhere or mention any amount.
The cheque leaf should be fresh.
The cheque leaf should be part of the cheque book issued by your bank and not any random one borrowed from others.
It needs to contain information like IFSC and MICR code, name and bank address/branch.
It also needs to be a cancelled cheque with name printed on it and your account number printed.
No extra information like the amount, signature or account payee details, etc should be handwritten.
While drawing parallel lines across, make sure not to cover or block out any information on the cheque such as the IFSC/ MICR codes, bank address, your printed name or account number.
Hand over the cancelled cheque only to the concerned official or institution after doing your checks as your account information is present on the cheque.
You may need a cancelled cheque leaf for completing your KYC as your bank details are present on it.
A cancelled leaf is also needed when you open a new savings or current account.
A cheque that’s cancelled is required to start ECS which is an e-clearance service.
You may need a cheque that’s cancelled to take out your EPF fund
When borrowing a housing loan, education loan or car loan, you would have to make monthly payments. In order to complete the EMI process, the bank or lender would request a cheque that has been cancelled.
Another cancelled cheque example is when you have to make an expensive buy such as a large screen television, a home appliance or gadget at a no cost EMI on a platform such as Bajaj MARKETS. You may have to present a cancelled cheque so that you may apply for a EMI Network Card to make your no cost EMI purchases effortlessly.
Planning to make investments in mutual funds or stock markets? You may need a cancelled cheque leaf for opening a demat and trading account. Yet another cancelled cheque example is when you have to submit it to get your insurance policy processed.
You would need to submit a cheque that has been cancelled as proof of you having an account with a certain bank or financial institution. It is used for KYC purposes and for processing of loans, opening new accounts with a bank, brokerage or fund house, among others.
You should never sign a cancelled cheque leaf nor write anything on it.
You would have to tear out a fresh cheque leaf from the cheque book issued by your bank and draw a couple of lines in a parallel manner on it with ‘Cancelled’ written in block letters.
Never give out a cancelled leaf to unknown people or randomly because although it cannot be used for withdrawal, your account details with a bank are present on it. Only submit it to authorised officials and institutions.
You are allowed to use the same cheque leaf that has been cancelled several times as long as you still have an account with the bank that has issued it.