Section 188
Section 188: mode of repayment of certain loans, deposits or specified advances
Section 188 mirrors Section 185 on the repayment side - a banking company, co-operative bank, other company, co-operative society, firm or other person cannot repay a loan, deposit, or specified advance of ₹20,000 or more in cash; it must go through an account payee cheque, account payee bank draft, ECS, or another prescribed electronic mode.
The core restriction
No branch of a banking company or co-operative bank, and no other company, co-operative society, firm or other person, shall repay a loan or deposit made with it, or a specified advance received by it, except through an account payee cheque, an account payee bank draft drawn in the name of the person who made the loan/deposit/advance, or by ECS through a bank account or another prescribed electronic mode, if:
- the loan, deposit or specified advance, together with any interest payable on it; or
- the aggregate amount of loans/deposits held by that person with the branch/company/society/firm (individually or jointly) on the repayment date, together with interest payable; or
- the aggregate amount of specified advances received by that person (individually or jointly) on the repayment date, together with interest payable, is ₹20,000 or more.
Repayment by crediting a bank account
A branch of a banking company or co-operative bank may also repay a loan or deposit by crediting it to the savings bank account or current account (if any) that the payee holds with that branch.
Exceptions
The restriction does not apply to repayment of a loan, deposit or specified advance taken or accepted from:
- the Government;
- any banking company, post office savings bank, or co-operative bank;
- any corporation established by a Central, State or Provincial Act;
- any Government company as defined in Section 2(45) of the Companies Act, 2013;
- any institution, association, or body (or class of them) notified by the Central Government.
Higher ₹2,00,000 threshold for agricultural credit societies
The ₹20,000 threshold is replaced by ₹2,00,000 for a deposit repaid to a member by a primary agricultural credit society or a primary co-operative agricultural and rural development bank, or a loan repaid by a member to such a society/bank.
Definition
"Loan or deposit" means any loan or deposit of money that is repayable after notice or after a period, and, for a person other than a company, includes a loan or deposit of any nature.
Frequently asked questions
What is the cash repayment limit for loans and deposits under Section 188?
₹20,000 - once the loan/deposit/specified advance (together with any interest), or the aggregate outstanding balance with that lender, reaches ₹20,000 or more, repayment must be by account payee cheque, account payee bank draft, ECS, or another prescribed electronic mode.
Can a bank repay a deposit by crediting the customer's own account with it?
Yes - Section 188(2) specifically allows a banking company or co-operative bank branch to repay by crediting the loan or deposit to the payee's savings or current account at that branch.
What is a 'specified advance' under Section 188?
As defined in Section 189(d), it means any sum of money in the nature of an advance, by whatever name called, in relation to the transfer of an immovable property, whether or not the transfer takes place.
Related sections
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Check your cash repayment compliance with our tax teamLast updated 9 September 2026