You might have been asked to provide a "cancelled cheque" when opening a brokerage account, setting up an EMI, or applying for insurance. But what exactly is it, and how do you make one safely?
The Purpose of a Cancelled Cheque
A cancelled cheque serves as a **proof of bank account**. It doesn't allow anyone to withdraw money from your account. Instead, it provides the following essential details to the requesting party:
Account Number
IFSC / Routing Code
MICR Code
Account Holder Name
How to Cancel a Cheque Safely
Cancelling a cheque is simple, but doing it incorrectly can lead to security risks. Follow these steps:
- Step 1: Draw two parallel lines diagonally across the cheque.
- Step 2: Write the word "CANCELLED" between those lines in capital letters.
- Step 3: DO NOT SIGN the cheque. A cancelled cheque should never have your signature.
- Step 4: Ensure that your account number and name are still clearly visible.
When is it required?
- KYC Documentation: For financial services like mutual funds or stock trading.
- Salary Processing: When joining a new company to ensure they have the right account for direct deposit.
- Insurance Claims: To verify where the claim amount should be sent.
- Loan Applications: To set up automated monthly repayments.
Frequently Asked
Can I use a cancelled cheque for a closed account?
No. A cancelled cheque must be from an active account that you currently use for transactions.
Is it safe to share a cancelled cheque?
Yes, as long as you have written 'CANCELLED' clearly and haven't signed it. It's a standard verification document.