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.
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:
A cheque can be of different types like bank cheque, self-cheque, open cheque, crossed cheque, cancelled cheque, state cheque, etc.
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.
There could be numerous applications for a cancelled cheque. However, such a cheque cannot be used to withdraw any money from the bank account.
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:
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.
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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.