‘Unable to protect depositors’: RBI cancels licence of Sarvodaya Co-operative Bank

Rashmi Pandey — Wed, 13 May 2026 05:17:23 +0000

The Reserve Bank of India on Tuesday cancelled the licence of Mumbai-based Sarvodaya Co-operative Bank Ltd citing inadequate capital, weak earning prospects and failure to comply with several regulatory requirements under the Banking Regulation Act.

According to the RBI, the cancellation came into effect from the close of business on May 12, 2026, following which the bank has been prohibited from carrying out any banking activities, including accepting deposits and repaying customers.

The central bank said the financial condition of the co-operative lender had deteriorated to a point where it would no longer be able to repay existing depositors in full. RBI also stated that allowing the bank to continue operations would adversely affect public interest and depositor safety.

The RBI has requested the Commissioner for Cooperation and Registrar of Cooperative Societies in Maharashtra to initiate the winding-up process and appoint a liquidator for the bank.

In a major relief for customers, the RBI clarified that depositors would remain protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) framework. Every eligible depositor can claim insurance coverage of up to ₹5 lakh on their deposits, subject to DICGC rules.

The central bank said approximately 98.36 per cent of the bank’s depositors are expected to receive the full value of their insured deposits. RBI further disclosed that as of March 31, 2026, the DICGC had already disbursed ₹26.72 crore toward insured claims linked to the bank.

Officials said the bank failed to meet multiple provisions of the Banking Regulation Act and lacked adequate capital reserves and viable earning capacity necessary to continue functioning as a banking institution.

The latest action reflects the RBI’s continued regulatory crackdown on financially stressed urban co-operative banks across India. In recent years, the central bank has tightened oversight and cancelled licences of several weak co-operative lenders to protect depositors and maintain confidence in the banking system.

The development has once again raised concerns regarding governance standards, financial discipline and risk management practices within sections of India’s urban co-operative banking sector.

BankLicenceCancelled | Business Upturn

‘Unable to protect depositors’: RBI cancels licence of Sarvodaya Co-operative Bank