The Reserve Bank of India (RBI) has cancelled the banking license of Mumbai-based Sarvodaya Co-operative Bank Ltd., effective from the close of business on May 12, 2026. This decision prohibits the bank from conducting any further banking operations, including accepting new deposits or repaying existing ones.
Reasons for License Cancellation
According to an official statement issued by the RBI, the cancellation stems from the bank's failure to comply with multiple provisions of the Banking Regulation Act, 1949. Key reasons cited include inadequate capital, poor earnings prospects, and non-compliance with essential regulatory requirements. The central bank concluded that allowing the co-operative bank to continue operations would be detrimental to public interest and harmful to its depositors, as its current financial position renders it unable to repay all depositors in full.
Impact on Depositors and DICGC Protection
Despite the license revocation, depositors of Sarvodaya Co-operative Bank are protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) framework. Every depositor is eligible to receive insurance coverage up to ₹5 lakh on their deposits, as per the provisions of the DICGC Act, 1961.
- Coverage Extent: Each depositor is insured for a maximum of ₹5 lakh.
- Depositors Protected: Data submitted by the bank indicates that approximately 98.36% of depositors were entitled to receive the full amount of their insured deposits when restrictions were initially imposed.
- Claims Paid: As of March 31, 2026, the DICGC had already disbursed ₹26.72 crore towards insured deposits based on claims from eligible account holders.
Winding-Up Proceedings Initiated
Following the RBI's action, the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, has been instructed to issue an order for the winding up of Sarvodaya Co-operative Bank and to appoint a liquidator. This step ensures an orderly resolution process for the bank's remaining assets and liabilities.
This move underscores the RBI's ongoing commitment to strengthening the supervision of financially distressed co-operative banks and safeguarding depositor interests within India's broader banking system.