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Issuing a Cancelled Cheque – Know the Uses, Procedure & Caution

Although nobody can withdraw money from your account by presenting a cancelled cheque, however, it can used by wrong people for various minor and major frauds.

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Updated:October 11, 2017, 5:08 PM IST
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Issuing a Cancelled Cheque – Know the Uses, Procedure & Caution
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A Cancelled cheque is issued in India for various purposes. Top 5 places where you may need to issue a cancelled cheque are:

1. Electronic Clearance Service
While setting up an ECS (Electronic Clearance Service) from your account, you need to give a cancelled cheque as a proof that you hold a valid account in the aforementioned bank in your name.

2. Employer's Provident Fund
While withdrawing money from your EPF (Employer's Provident Fund), your employer's accounts team will need a cancelled cheque to verify details and ensure that money is going to an account that you own.

3. Equated Monthly Installment
While applying for various loans like personal loan, home loan or a consumer durable loan, you may need to furnish a cancelled cheque for clearing EMIs (Equated Monthly Installments)

4. Insurance Policy
While purchasing a new insurance policy or renewing an old one or making an insurance claim, you need to submit a cancelled cheque to the insurance company.

5. Mutual Fund Investments
If you have associated a bank account for making recurrent mutual fund investments, then you need to furnish a cancelled cheque as part of your KYC (Know Your Customer).

How to issue a Cancelled Cheque

1. You need to strike off the cheque by drawing two parallel lines across it and mention CANCELLED between them.

2. Do not sign the cheque or mention date or write anything else on the cheque leaf.

Be Aware

Although nobody can withdraw money from your account by presenting a cancelled cheque, however, it can used by wrong people for various minor and major frauds. Thereby, even if you are issuing a cancelled cheque, make sure the person or company is credible and doesn't land you in trouble.
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