The Reserve Bank of India (RBI) has cancelled the banking licence of Mumbai-based Sarvodaya Co-operative Bank with immediate effect.
The central bank said the co-operative bank did not have enough capital and had poor earning prospects, making it unsafe to continue operations.
With this decision, the bank has officially stopped all banking activities from the close of business on May 12, 2026.
Why Did RBI Cancel the Bank’s Licence?
According to the RBI, Sarvodaya Co-operative Bank failed to follow important rules under the Banking Regulation Act.
The central bank said the bank’s financial condition had become weak and continuing its operations could harm depositors’ interests.
RBI also stated that the bank was no longer in a position to repay all depositors fully with its current financial health.
Because of this, the Commissioner for Cooperation and Registrar of Cooperative Societies in Maharashtra has been asked to begin the process of winding up the bank and appointing a liquidator.
What Will Happen to Customers’ Money?
The RBI has clarified that depositors will still receive protection under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.
Under DICGC rules, every depositor is eligible to receive insurance coverage of up to Rs 5 lakh on their deposits.
According to RBI data:
Around 98.36 percent of depositors are expected to get their full insured amount back
DICGC has already paid Rs 26.72 crore to eligible depositors as of March 31, 2026
This payment process is being carried out based on claims and consent received from depositors.
Bank Can No Longer Operate
Following the cancellation of its licence, Sarvodaya Co-operative Bank is no longer allowed to carry out any banking activities.
This includes:
Accepting new deposits
Repaying deposits
Providing banking services
The RBI said allowing the bank to continue operations would have negatively affected public interest and customer trust in the banking system.
The development is another reminder for customers to stay informed about the financial health and regulatory status of their banks, especially in the co-operative banking sector.
