Cheques are the most commonly used negotiable instrument by citizens for transactions. However, after the advent of digital transactions, things have changed quite a bit. The older generation, on the other hand, still prefers cheques over digital transactions as they are habituated to a physical cheque. Another instance where cheques are still relevant is when a cancelled cheque is required to be submitted. It is easy to write a cancelled cheque and generally acts as a proof for account holders. Therefore, some traditional features of banking- it can be concluded- will not be easily replaced by modern banking.
Times when a cancelled cheque may be asked of you:-
In the case of a host of banking and financial activities which citizens engage in, the lenders or concerned companies perform their due diligence on the applicant. A singular, most-important part of the process for the individual involved is submitting a cancelled cheque from his cheque book. Let’s look at a few instances below:
1) While going for a loan, alongside many documents such as income proof, address proof, identity proof; an applicant is requested to get a cancelled cheque.
2) Suppose you are buying high-value products like a consumer durable, vehicle on EMIs, the loan provider is likely to ask for a cancelled cheque. Even EMI related purchases warrant a cancelled cheque submission at the outset.
3) KYC details of citizens can be verified easily with the help of cancelled cheques. In case you are looking to invest in mutual funds, normally, the company facilitating your investments ask applicants to submit a cancelled cheque.
4) When you are getting an insurance cover for yourself, the company issuing the policy asks for a cancelled cheque to verify your bank account information.
5) Electronic Clearing systems are provided by banks for you to make recurring payments to organizations at regular intervals. Getting this banking service activated will require a cancelled cheque to be produced.
6) A cancelled cheque has to be submitted also when you claim your earnings from the Employee Provident Fund (EPF).
Cancelling a cheque
Have you ever written a cheque? Like there are a few important guidelines to filling up a cheque like entering the payee’s name, penning the figure & signature, there are a few simple steps to writing a cancelled cheque as well. Another thing related to writing cancelled cheques that have drawn wide ambiguity among people is whether or not to sign them. These days, banks give their customers- cheque book with their name printed at the bottom. So there’s no need to sign on a cancelled cheque. That proof is enough to ascertain you’re the account-holder. Even if name is not mentioned, you need not sign but just draw 2 parallel lines diagonally and write the word ‘cancelled’ between the lines. Using a pen with blue or black ink is mandatory here, same as writing a regular cheque.
Do not worry:
- Your cancelled cheque is submitted primarily to give out information. Details like bank account number, bank’s name, bank branch, MICR code, IFSC, account holder’s name are shared.
- This information cannot be misused by the party. Minimize any risk involved by refraining from signing on it.
- Your banking information may be on the cheque but the word ‘cancelled’ marked on the leaf makes the cheque null and void. And banks will not transact on it.
A cancelled cheque is an important step when you are embarking on financial activities as a new applicant and serves as validation for applicants as account holders. It’s advisable to hand over a cancelled cheque only to reliable authorities or companies and never to random individuals who you transact with.