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In the world, where the e-banking facilities, Online transaction, Mobile Banking etc. are booming fast like Global Warming just like that every business sector is providing various online services and making the lives of the customer simpler and convenient. Many products and services have been launched a smoother transaction and money saving. In the era of the Digital Banking, there are still some services that are worked out in a “Traditional Fashion”. In this article, we are going to learn about the Cancelled Cheques in details because it has been seen that even today, a cancelled cheques hold a lot of importance. Whenever any transaction takes place, a cancelled cheque is a must require.
“Traditional Fashion” means the banking methods that are done manually like the paper documents, cheques etc. and issuing a Cancelled Cheque is one such process that is done manually.
Let us define the meaning of a cancelled cheque in a pure Indian Context- A cancelled cheque is defined as two parallel lines drawn across the cheque in a diagonal manner and the word “cancelled” is written right between the two parallel lines.
But when it comes to defining in Banking terms, a cancelled cheque simply means that you hold an account in a bank. It is a kind of proof that you have an account in a bank.
List of the information that can be extracted from a Cancelled Cheque
- Name of the Bank
- Name of the Account Holder
- Bank Account Number
- IFSC Code
- MICR Code
Issuing a Cancelled Cheque
While issuing a cancelled cheque, you really don’t have to sign the cheque but there are some banks that do say to sign or issue a cancelled cheque with your signature on it. Cancelled cheques consist the details of your Account Number, Account Holder’s Name, MICR Code, Name and Branch Address of the Bank.
No one can withdraw money from your account using a cancelled cheque. Fraudulent activities used to take place before, therefore make sure that the person whom you are handing the cancelled cheque is trustworthy.
Method of Issuing a Cancelled Cheque
Below are the steps to issue a cancelled cheque.
- Get your Cheque Book: Carry your chequebook and visit the bank account which you want to use. Remember that you need to have a cheque facility.
- Draw Parallel Lines: You can use either a blue or a black pen and draw two parallel lines diagonally across the cheque. Write the word “Cancelled” in between the two parallel lines.
- Signature: It is not necessary to put the signature on it. However, if any bank or any organization is asking for a cancelled cheque, it specifically asks for your signature. However, do a cross check with the senior officer of the Organization whether you need to put a signature or not.
Uses of Cancelled Cheques
A Cancelled Cheque can be used for a number of reasons. Some of the uses of the Cancelled Cheques are:
- While Opening a Bank Account
Some banks will ask for the cancelled cheque while opening a bank account. This can be asked for in the case of opening a savings account or a current account.
- It acts as a KYC Document
KYC means “Know your Customer”. A several numbers of documents are asked by various financial organizations so that a person who is involved in some financial activity (such as in the investment or mobile wallet etc.) can be properly verified. A cancelled cheque can be asked as a part of a KYC Document as it provides all the necessary details about the bank as well as the person.
- For ECS Collection
ECS stands for the “Electronic Clearance System”. This is a method where a service provider or an investment company debit a certain amount of money from your bank account directly on a specified date of every month or every quarterly or half-yearly. The amount is automatically deducted from your account.
- EMI Payments
We often purchase some products such as mobile phones, washing machines or television or even a Home Loan etc. in EMI procedure. For this case, the company may ask for a cancelled cheque. The details present in the cancelled cheque is used by the companies to provide the EMI Facilities and the EMI Amount is directly debited from your account.
- In Insurance Companies
Cancelled Cheques are also used while purchasing an insurance policy. The insurance policy can be a money back, endowment, term, health etc. The premium amounts of the insurance are directly debited from your savings account. The account details are directly taken from the cancelled cheque that you have provided.
- Provident Funds
To withdraw the provident fund amount, the companies ask for a cancelled cheque with your name on it to validate your account details.
Cancelled cheques have a quite a number of uses and also it can be misused. So you need to make sure that you are handing over a cancelled cheque to a proper person who is authorized by a company or an organization. It is an important document but unfortunately, many of us are not fully aware of its uses and importance.