Cancelled cheque – What is It and How to Write It?

The Insta EMI Card has revolutionised how we make purchases today. While modern payment methods continue to evolve, certain traditional banking documents remain essential—like cancelled cheques. These important documents verify your bank account details when applying for financial services, including when you shop using your Insta EMI Card. Understanding how these documents work alongside convenient EMI options ensures smoother financial transactions for all your purchases.

This comprehensive guide explains everything about cancelled cheques—from proper cancellation techniques to their various applications—helping you manage your finances effectively while making the most of your Insta EMI Card benefits.

What is a cancelled cheque?

A cancelled cheque is an essential banking document marked with two parallel lines with "cancelled" written between them. This document serves as proof of your bank account ownership and contains vital details such as your account number, name, MICR code, IFSC code and bank branch information. When shopping with your Bajaj Finserv Insta EMI Card, you might need to submit a cancelled cheque as verification.

Why is it necessary? Financial institutions require cancelled cheques for various transactions including setting up EMI payments, loan processing, and KYC verification. This simple document helps prevent fraud by confirming your banking details before financial commitments are made.

Remember, a properly cancelled cheque cannot be used for withdrawals, ensuring your account security while still serving as legitimate proof of your banking relationship.

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What is the significance of a cancelled cheque?

A cancelled cheque plays a crucial role in various financial transactions. It serves as official verification of your bank account details without risking misuse. Financial institutions, including Bajaj Finserv, require this document for EMI setups, loan processing, and account validations. The cancelled cheque confirms your account number, IFSC code, and bank branch authenticity, thereby preventing fraud and ensuring secure transactions. This simple document bridges the trust gap between you and financial service providers, making it indispensable in today's banking ecosystem.

How to write a cancelled cheque – Step-by-step process:

A cancelled cheque is often needed for bank processes or financial applications. Here’s how you can make one in just a few simple steps:

Step 1: Take a fresh cheque

1. Pick a blank cheque from your chequebook.
2. Do not sign it.

Step 2: Mark it as cancelled

1. Draw two parallel lines across the cheque.
2. Write "CANCELLED" in big, clear letters between the lines.

Step 3: Keep important details visible

1. Make sure the cheque still shows:
   1. Your account number
   2. Your name
   3. Bank’s name and branch
   4. MICR code

When is a cancelled cheque required

A cancelled cheque is required for a number of reasons in India. Firstly, it is used as proof of payment in various financial transactions such as loan applications, insurance policies, and credit card applications. It serves as evidence of the account holder's name, bank details, and signature. It is also used as a means of providing bank account details to third parties, such as for direct deposit of salaries and dividends. Additionally, cancelled cheques are used for setting up automatic bill payments, as it provides authorization for the service provider to deduct the required amount from the account holder's bank account. Therefore, it is important for individuals to keep a record of cancelled cheques to ensure smooth financial transactions and to avoid any disputes in the future.

1. For Know Your Customer (KYC): When you need to do the KYC for making investments in the stock market, mutual funds, or other financial schemes, a cancelled cheque is required.
2. EPF: It is a must to provide a cancelled cheque for withdrawing funds from your Employee Provident Fund (EPF) account.
3. ECS: To enable Electronic Clearing Service (ECS) for your bank account, you need to provide a cancelled cheque as proof of your bank account details.
4. NBFC: A cancelled cheque is often required by banks or Non-Banking Financial Companies (NBFC) to process Equated Monthly Installments (EMIs) for loans or credit amounts.
5. DEMAT: For opening a Demat account, you need to provide KYC documents such as proof of identity and address, along with a cancelled cheque as proof of your bank account details.
6. Insurance: While purchasing an insurance policy, submitting a cancelled cheque serves as proof of your bank account, which is necessary for the insurance company to process premium payments and other financial transactions.

Important uses of cancelled cheque

• EMI purchases – Submit a cancelled cheque to verify bank details while buying high-value products on EMIs.

• Loan applications and ECS registration – Required for loan approvals and setting up Electronic Clearance Service (ECS) for automatic payments.

• Investments and insurance – Needed when investing in mutual funds, provident funds, or purchasing an insurance policy to link your bank account for payments.

How to prevent risk associated with a cancelled cheque

Understanding the correct way to cancel a cheque is essential to prevent any potential issues or rejections.

• No risk of fraudulent withdrawals – Cancelled cheques are legally void, ensuring they cannot be misused for unauthorized transactions.

• Proper cancellation method – Always use a blue or black ink pen to cancel cheques, as banks may reject cheques cancelled in other colours.

• No signature required – A cancelled cheque is only for verification purposes, so signing it is unnecessary.

• Mark clearly to avoid rejection – Draw two parallel lines and write ‘Cancelled’ to ensure it is correctly invalidated and accepted when required.

What should I do if a cancelled cheque is lost or misplaced?

If you lose your cancelled cheque, act promptly to protect your banking information. First, contact your bank immediately to report the loss—they will advise on specific security measures for your account. Secondly, monitor your account statements regularly to identify any suspicious transactions and report them without delay. Many banks offer alternatives such as bank statements with IFSC details or account verification letters that can serve the same purpose as a cancelled cheque for your Bajaj Finserv Insta EMI Card application or other financial requirements.

What is the difference between a stop payment and a cancelled cheque

Now that you know how to issue a cancelled cheque and its uses, you can enjoy a smoother banking experience. You can also get the benefits of shopping on Easy EMIs just as easily from the Bajaj Finserv EMI Network!

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Conclusion

In conclusion, cancelled cheques play a crucial role in financial transactions in India. While they may seem like a simple piece of paper, they serve as proof of payment and can be used as evidence in case of any disputes arising from the transaction. It is recommended that individuals keep a record of all cancelled cheques to ensure that they have evidence of their financial transactions. Moreover, it is important to remember that a cancelled cheque is not the same as a lost or stolen cheque, and appropriate measures should be taken in case of any such incidents. Therefore, it is crucial to understand the importance of a cancelled cheque in India and to keep them safely for future reference.