What is a Cancelled Cheque? Uses, Format & How to Write One

Cancelled cheques are a routine ask in India’s financial paperwork. Banks, employers and investment platforms request one when you apply for a loan, set up EMIs, open a DEMAT account, process insurance claims or withdraw EPF. Though a cancelled cheque does not move money, it has important information that allows institutions to verify your account quickly and reduces the potential of mistakes.

Explore what does cancelled cheque means, why it is required, the right format, a step-by-step guide on how to write a cancelled cheque, risks and FAQs so you know you are compliant and secured. If you are setting up an EMI for a loan or card mandate, you should gauge your repayment beforehand using the Godrej Capital EMI Calculator so that you plan better before you submit documents.

What is a Cancelled Cheque?

A cancelled cheque is a cheque leaf that is crossed with two parallel lines and has the word CANCELLED written across it in capital letters. Importantly, a cancelled cheque is not signed. Although such a cheque cannot be used to withdraw money, it displays crucial details such as:

• Account holder’s name
• Bank name and branch
• Account number
• IFSC and MICR codes

This makes a cancelled cheque a secure and convenient way of sharing banking details without enabling any monetary transaction. It should not be confused with a stop payment cheque (which is still valid but blocked on request) or a cheque that has already been encashed.

Why is a Cancelled Cheque Required?

Financial institutions often request a cancelled cheque as part of documentation because it serves as proof of ownership of a bank account. Since the cheque carries account details but cannot be used for transactions, it helps prevent fraud while ensuring compliance with KYC norms.

Some common scenarios where a cancelled cheque is required include:

1. Loan applications and EMI setups
2. Mutual fund investments and DEMAT account openings
3. Employee Provident Fund (EPF) withdrawals
4. Salary processing by employers
5. Insurance premium payments and claims
6. Setting up auto-debit for bills and subscriptions

In each of these cases, the cancelled cheque helps verify banking details quickly and accurately.

Uses of a Cancelled Cheque

The uses of a cancelled cheque in India extend across banking, investments, and employment. Some of the key applications are:

1. Bank Account Verification – Required when applying for loans, credit cards , or opening a new account.
2. Electronic Clearing Service (ECS) Setup – Used to authorise automatic EMI deductions or recurring payments.
3. Income Tax Refunds – Helps establish proof of bank account for ITR processing.
4. KYC Verification – Supports financial services like stock broking, insurance , and lending.
5. Mutual Fund Investments – Required for linking bank details with investment accounts.
6. Insurance Policies – Ensures smooth premium payments and claim settlements.
7. EPF Withdrawals – Necessary for transferring or withdrawing provident fund amounts.
8. Salary Credit Verification – Employers often request it during onboarding.
9. Utility Bill Payments – Facilitates auto-payment enrolments.

This wide range of uses makes it advisable to keep a few cancelled cheques ready for official purposes.

How to Write a Cancelled Cheque Correctly

Writing a cancelled cheque is a simple process, but accuracy is important. Here are the steps:

1. Take a fresh cheque leaf from your cheque book.
2. Draw two parallel diagonal lines across the cheque.
3. Write the word CANCELLED clearly between the lines in capital letters.
4. Ensure account details such as account number, IFSC , and bank name remain visible.
5. Do not sign the cheque or add any other writing.

Tips: Use blue or black ink for clarity. Avoid overwriting or covering key details. Never hand over a blank, signed cheque instead of a cancelled one.

Format/Example of a Cancelled Cheque

A cancelled cheque should look like a normal cheque except for the cancellation marks. The two diagonal lines run across the cheque, with CANCELLED written boldly in between. Key information such as:

• Bank name
• Branch details
• Account holder’s name
• Account number
• IFSC and MICR codes

Risks and Precautions When Sharing a Cancelled Cheque

Although a cancelled cheque cannot be used for withdrawal, it still carries sensitive information. To avoid misuse, keep these precautions in mind:

• Share it only with trusted institutions and authorised representatives.
• Do not post scanned copies online or share casually.
• Maintain a record of cheque numbers that have been cancelled.
• Monitor your account activity after sharing a cancelled cheque.
• If a cancelled cheque is lost or misplaced, inform your bank immediately.

Being cautious ensures that your banking information remains safe from fraud or identity theft.

Final thoughts

A cancelled cheque is a very important aspect of the financial system in India. It is widely used for verifying bank accounts, setting up investments, EMIs, and even applying for a Business Loan. Being able to write a cancelled cheque correctly and taking valid precautions around sharing it can help smoothen transactions and save you time and hassle.

It’s always a good idea to keep a couple of cancelled cheques handy, as they are often required for loans (including personal and Business Loans), insurance, salary verification, or investing.

They can also be useful when you apply for a loan or while setting up repayment schedules using tools like a Business Loan EMI Calculator.

FAQs

Q.1. Is a signature needed on a cancelled cheque?

A. A signature is not needed on a cancelled cheque, and you should never sign one.

Q.2. Can I use a copy of a bank passbook or statement instead of cancelling a cheque?

A. You can use a copy of your bank passbook or bank statement if the institution will accept that. However, many still prefer a cancelled cheque.

Q.3. How long can a cancelled cheque remain unused for verification purposes?

A. There is no set expiry date for cancelled cheques used for verification purposes, however, it is always helpful to use a recent cancelled cheque.

Q.4. Can I cancel a cheque using red ink?

A. It is better to use blue or black ink in order to have clarity, and for consistency where people are used to seeing blue or black ink.

Q.5. What is the difference between a cancelled cheque and stop payment?

A. A cancelled cheque has simply been voluntarily invalidated, the cheque cannot be used for payment. A stop payment notice is a request to the bank for them to block a cheque previously issued.

Q.6. Can someone withdraw funds using a cancelled cheque?

A. No, a cancelled cheque cannot be used to withdraw or transfer funds, as there is no signature.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially.
The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements.
Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com