First things first!
Recently, a resident of Thane, Maharashtra was duped of Rs.50,000 by mischief makers who recognized themselves as agents of banks.
The victim had applied in the same bank for a credit card and received a call from a miscreant who posed as a bank executive. The victim was asked to provide the fraudsters with the cancelled cheque.
Later, they went on to misuse them. The incident came into limelight when the victim received text messages on his phone quoting that a transaction was made from the account. It is not the first time when the instances of frauds concerning cancelled cheque have emerged as a misused tool.
Hence, if you are also asked to issue a cancelled cheque in lieu of KYC procedures’ processing for availing financial services, then you should read this post.
Why is a cancelled cheque needed?
Generally, cancelled cheque is used to authenticate that a specific bank account number belongs to you and not anyone else. It is used to prove that such a bank account number, bank’s name, address, account holder name and other details are legitimate.
From time to time, you may be asked to submit a cancelled cheque for diverse reasons such as processing and completion of KYC formalities. It may also include ECS set up, applying for loans, credit cards, and starting a SIP.
You may also be asked to submit a cancelled cheque by your insurance company at the time of renewal or buying of the policy.
You may be working in a private or a public limited company and maybe contributing towards PF from your Salary. You may withdraw it if you are jobless for a continuous period of 2 months. Hence, while applying for the withdrawal of the PF amount, you will need to submit a cancelled cheque. It will be utilized to ensure that the bank account is in your name so that your hard-earned contributed money goes into your account.
Also, for opening a Demat account, setting up of ECS deduction from your account for a specific amount for a period, a cancelled cheque will be needed. ECS mandate is necessary for automated deduction.
What can you do to avoid cancelled cheque misuse?
A cancelled cheque is anyways cancelled, and hence; it can’t be used for receiving and sending money. In other words, a cancelled cheque carries absolutely no monetary value at all.
But while issuing someone a cancelled cheque for availing financial services and others, you should ensure to write it correctly to avoid all instances of misuse.
You should draw two lines parallel across the cheque leaf that you want to present as a cancelled cheque and write the word ‘Cancelled.’ It is up to you to write the word ‘Cancelled’ either in bold or in sentence case. You should also ensure to issue it using only blue or black ink.
Always remember that the first sign of your cancelled cheque being misused in the future is when you are asked to sign in. You should not do that as a cancelled cheque comes with no financial value at all. Even if you are being asked to sign a cancelled cheque to avail of a service, you should take the reason from the service provider for doing so in writing on the letterhead. It will help you avoid any issues in the future.
Cancelled cheques are used only to verify your bank details to avoid getting back to you again for KYC and other purposes. It is asked to speed the processing of the services being applied by you. Writing the word ‘Cancelled’ is vital, and you should use dark ink so that it can’t be erased and misused.