How to Write a Cancelled Cheque?

Mar 22nd 2024

A cancelled cheque is one of the most common elements in the banking and finance sector. Despite this, a majority of people don’t know how to write a cancelled cheque. Whether you are applying for a personal loan, home loan, or any other type of loan or even opening a Demat account, presenting a cancelled cheque is extremely necessary. In this post, you will get to know everything about a cancelled cheque and how you can write one. 

What is a Cheque?

A cheque refers to a negotiable financial instrument that directs the bank to pay a certain amount of money to the person or organization in whose name the cheque is issued by a person or business. The amount mentioned in the cheque is deducted from the drawer’s bank account and credited to the bank account of the cheque bearer. There are mainly three parties related to a cheque including:

  1. Drawer: A drawer is a person who writes and signs a cheque to pay a certain amount through a cheque.
  2. Drawee: The drawee of a cheque refers to the bank that has been directed to pay the amount to the payee.
  3. Payee: It refers to the individual to whom the base has been said to pay the amount through the cheque.

A cheque can be of different types like bank cheque, self-cheque, open cheque, crossed cheque, cancelled cheque, state cheque, etc.

What does a cancelled cheque mean?

A cancelled cheque refers to a cheque that contains a diagonal cross made using two straight lines and with the term “cancelled” mentioned across. A cheque is known to get cancelled if it contains any errors that have been made while preparing the cheque. This is one reason why it is called a cancelled cheque, however, there is no assurance that the cheque shouldn’t hold anything else other than the word “cancelled”. The cheque is typically cancelled so that the cheque is not misused in any way by anybody.

A cancelled cheque is also used as proof that states that the person has an account in the bank. Moreover, even though a cancelled cheque cannot be utilized to take out money from the account of the drawer, it tends to feature several other details like the name of the account holder, account number, IFSC Code, MICR code, bank name and branch of the address in which the account is present, and the cheque number.

Applications of A Cancelled Cheque:

There could be numerous applications for a cancelled cheque. However, such a cheque cannot be used to withdraw any money from the bank account.

  • Know Your Customer (KYC): Cancelled cheques are widely used for various types of KYC procedures. For example, when it comes to investing in mutual funds or stocks, a cancelled cheque is used by the fund house to ascertain that the respective person has a bank account in the bank. The cheque also helps in the verification of the name and account number of the account holder and the name and branch address of the bank in which the account exists.
  • EQUATED MONTHLY INSTALLMENTS (EMI): In different types of loans like auto loans, home loans, education loans, business loans etc., there are different EMI options available. A cancelled cheque would be asked by the bank or the relevant organization in a bid to fulfil the requirements and pave the way for the chosen monthly payment option.
  • DEMAT ACCOUNT: Individuals are supposed to hold shares in an electronic format by using a demat account. To start a Demat account, a cancelled check, an account opening form and other KYC papers (identification and address evidence, for example) need to be submitted to the stockbroker.
  • ELECTRONIC CLEARANCE SERVICE (ECS): The amount can be transferred electronically between bank accounts using the ECS method. If you set up an electronic funds transfer (ECS), the bank will need a cancelled cheque from you to take funds from your account every month.
  • WITHDRAWAL OF EMPLOYEE PROVIDENT FUND (EPF): A cancelled cheque is supposed to be deposited while taking out money from the EPF to validate the account details of the individual who has submitted the withdrawal request.
  • OPENING A BANK ACCOUNT: When it comes to opening a bank account, a cancelled cheque needs to be submitted to pave the way for further processing. 
  • INSURANCE POLICIES: While buying an insurance policy, some insurance companies ask for a cancelled cheque from the individual looking to buy an insurance policy.

Best way to write a cancelled cheque;

It is extremely necessary to cancel a cheque as not doing so can result in unauthorized use. If you cancel a cheque and deposit it for a specific objective, the following steps should be kept in mind:

  • Step 1: Get a new cheque from your cheque leaf that you can choose to cancel. Do not put your signature anywhere on the cheque.
  • Step 2: Draw two parallel cross lines across the cheque.
  • Step 3: Mentioned “CANCELLED” between those lines in capital letters.

Do keep in mind that the parallel lines that you have drawn across the cheque do not overlap other important details like the account number, account holder’s name, MICR code, IFSC code, name and branch address of the bank where the account belongs to, etc.

For those who want to cancel a cheque due to some mistakes in the cheque, it is recommended to start from step 2 of the process as given above.


Q. Can a bank cancel the cheque?

No, the bank is not authorized to cancel a cheque on behalf of the account holders. Only the account holder is liable to cancel a cheque for well-defined reasons.

Q. Is it possible to use a scanned copy or photography of a cancelled cheque?

- A few businesses may be ready to take a scanned or photocopy of a cancelled cheque for verification objectives, however, it's necessary to validate these points with the concerned person or organization requesting it.

Q. Are there any risks related to a cancelled cheque?

A cancelled cheque is typically not risky. However, handing over a cancelled cheque to the wrong person can be used for fraud as your account number, IFSC code, name and branch address of the bank, IFSC code, etc. are listed.

You may also read: Everything You Should Know About Black Cheque


It is important that it is impossible to withdraw money from a cancelled cheque but fraudsters can misuse a cancelled cheque for various improper reasons. While providing a cancelled cheque to a person or organization, it is recommended to not sign it and make sure you give the cheque to a genuine person and represent the organization you are supposed to deal with.


Subscribe to our newsletter

Related Post

Reach out to our Experts if you have any Doubts

Like the best things in life, Consultations @InvestKraft are free

Drop a Mail or give us a Missed Call & Begin your Investment Journey here


Subscribe to our newsletter