The internet has taken over the world and has changed how things would work earlier. It has modernised how the banking sector works too. Internet banking provides facilities that eliminate the need for customers visiting the bank branches for services such as money transfer, cash withdrawal, and others. This has considerably reduced the use of cheque books, deposit slips, and other paper forms that were an essential part of banking services earlier.
However, you must know what a cancelled cheque signifies and the situations a cancelled cheque can come handy.
1. What is a cancelled cheque?
A cancelled cheque refers to a cheque that contains two parallel lines drawn across the layout. It is also necessary to write the term ‘cancelled’ between these lines. You need not make a signature on the cancelled cheque. The cancelled cheque will be used to gather details such as account number, account holder’s name, MICR code, name and branch name of the bank, and IFSC.
In a different context, a cancelled cheque is a cheque for which payment has already been done. The moment cash is drawn with a cheque, the bank marks it as cancelled. Once it is cancelled, the cheque cannot be used as an authorisation for the removal of additional funds from the payer’s account.
2. What does a cancelled cheque denote?
A cancelled cheque works as a proof for opening an account with a bank. You can submit a cancelled cheque in many cases to confirm your bank account details.
3. When would you need a cancelled cheque?
You may have to submit a cancelled cheque in the following cases:
- Mutual Funds:
If you are investing in mutual funds or the stock market, you must open a Demat account. The company would want you to submit a cancelled cheque to open the account to verify if the bank account associated with the investment is yours in reality. The requirement of the cancelled cheque is in accordance with the Know Your Customer (KYC) guidelines.
Equated Monthly Instalments (EMI) is the most sought after method of payment when you are buying a gadget or a high-value item. Individuals pay monthly instalments even in the case of loans such as car loan, home loan, education loan, and personal loan. To initiate the process of monthly instalments, you must submit a cancelled cheque as proof of having a bank account.
- Electronic Clearance Service:
An electronic clearance service automatically deducts money from your account every month for any transaction you have done. In this case, you must set up the electronic clearance service.
- Provident Fund Withdrawal:
Companies generally ask for a cancelled cheque when you want to withdraw your EPF money.
- Insurance Policy:
A cancelled cheque is required even when you are purchasing an insurance policy.