The Reserve Bank of India (RBI) on Tuesday cancelled the banking licence of Mumbai-based Sarvodaya Co-operative Bank, citing poor financial health, inadequate capital and weak earning prospects.
With the cancellation coming into effect from the close of business on May 12, 2026, the bank can no longer carry out any banking operations, including accepting or repaying deposits.
The RBI has also directed the Commissioner for Cooperation and Registrar of Cooperative Societies in Maharashtra to begin the process of winding up the bank and appoint a liquidator.
Depositors protected up to Rs 5 lakh
The central bank said depositors would be protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.
On liquidation, every depositor would be entitled to receive the deposit insurance claim amount of his/her deposits up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
“As per the data submitted by the bank, about 98.36 per cent of the depositors were entitled to receive the full amount of their deposits from DICGC as on the date of imposition of All Inclusive Directions,” the central bank said.
According to RBI data, DICGC had already paid Rs 26.72 crore towards insured deposits as of March 31, 2026.
The central bank’s statement indicates that most customers are likely to recover their full deposits within the insured limit.
RBI cites weak financial position
Explaining the action, the RBI said the bank was no longer financially capable of operating in a stable manner or meeting obligations towards depositors.
Giving reasons for the cancellation of the licence, the RBI said Sarvodaya Co-operative Bank, with its present financial position, would be unable to pay its current depositors in full.
“Public interest would be adversely affected if the bank is allowed to carry on its banking business any further,” RBI said, and added the lender has failed to comply with several regulatory requirements.
The RBI further stated that after the licence cancellation, the bank has been barred from conducting any banking activity.
Consequent to the cancellation of its licence, Sarvodaya Co-operative Bank has been prohibited from conducting the business of ‘banking’, which includes, among other things, acceptance of deposits and repayment of deposits.