'How to create a cancelled cheque?' is a common question, as many people are unsure about it. Cancelled cheques are
frequently requested in various financial transactions for verification purposes. By learning how to write a
cancelled cheque, you can ensure that your financial dealings proceed smoothly and securely.
What is a cancelled cheque?
A cancelled cheque is voided by the issuer, often by writing "CANCELLED" across it. Though unusable for
withdrawals, it contains crucial details like the account holder's name, account number, and MICR code. This
makes it valuable for verification purposes, such as setting up electronic payments, verifying account
ownership, and processing certain financial transactions. It is important to understand what is cancelled
cheque, as it is a standard request in various financial settings.
How to write a cancelled cheque?
1. Take a fresh cheque leaf: Start with an unused cheque from your chequebook. This cheque is also
referred to as a cancelled cheque leaf.
2. Draw two parallel lines: Using a pen, draw two diagonal lines across the cheque.
3.Write CANCELLED: Clearly write the word CANCELLED between the diagonal lines. Ensure it is legible
and covers a significant portion of the cheque. This step is crucial in learning how to make a cancelled cheque
correctly.
4. Do not sign the cheque: Signing is not necessary for a cancelled cheque. However, if you choose
to sign, do so within the designated signature area.
Following these steps will help you understand how to write cancelled cheque easily and avoid any confusion.
What are the uses of cancelled cheques?
1. Bank account verification: A cancelled cheque leaf is required when starting a new Fixed Deposit or
other investments and while applying for a loan, as it confirms your bank account details. This step helps
ensure the accuracy of the information provided.
2. Electronic Clearing Service (ECS): It is necessary for authorising automatic transfers of
utility bills, loan EMIs, and Mutual Fund investments. It simplifies recurring payments, making financial
management easier.
3. Income tax filing:It is used to verify your bank account details
for refunds. Providing accurate bank details ensures timely and correct refund processing.
4. Direct debit authorisation:It is required for setting up automatic payments for services. This
authorisation facilitates seamless, automated bill payments.
5. Salary processing: Employers may request a cancelled cheque to ensure correct salary crediting.
This helps avoid errors in salary deposits, ensuring employees are paid accurately and on time.
Why is a cancelled cheque required?
- KYC compliance: Banks and financial institutions use cancelled cheques for Know Your
Customer (KYC) verification to prevent fraud. This helps in establishing the authenticity of the account
holder's details.
- Loan applications: Lenders require a cancelled cheque to validate your bank account details
for disbursing loan amounts. It ensures that the loan amount is credited to the correct account.
- Insurance policies: Insurance companies often ask for a cancelled cheque when setting up
premium payments or processing claims. This is to verify the account from which payments will be
deducted or to which claims will be credited.
- Investment purposes: Mutual Funds and stock market investments may require a cancelled
cheque to verify your bank account for transactions. This verification is crucial for the seamless
transfer of funds during investments or withdrawals.
Also Read: Different types of Cheques in banking
FAQs
Is a signature required on a cancelled cheque?
No, a signature is not mandatory on a cancelled cheque. The primary purpose is to provide bank details
without allowing the cheque to be cashed. In many cancelled check examples, the cheque remains unsigned.
What can I use instead of a cancelled cheque?
In some cases, a bank statement, or a copy of the front page of your passbook can be used instead of a
cancelled cheque for verifying bank account details. However, this depends on the requirements of the
institution requesting the verification.
This guide covers everything from how to make a cancelled cheque to understanding what is a cancelled cheque
and its essential role in financial transactions.
Disclaimer: This article is for information purpose only. The views expressed in this article
are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank
Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by
the reader for taking any financial decisions based on the contents and information. Please consult your
financial advisor before making any financial decision.
