The Reserve Bank of India (RBI) has cancelled the license of Karwar Urban Co-operative Bank, located in Karnataka.
This action was taken because the bank lacked sufficient income prospects and did not comply with banking regulations.
In recent months, RBI has penalized or revoked the licenses of several banks for similar reasons.
According to an RBI order issued on 22 July 2025, the bank is no longer allowed to carry out any banking operations.
This decision became effective from the close of business on 23 July 2025.
RBI stated that the bank does not have adequate capital and fails to meet the requirements of the Banking Regulation Act, 1949.
No Future Income & Legal Violations
RBI further explained that the bank has no potential for future earnings and lacks adequate market capital.
This situation violates sections 11(1), 22(3)(d), and 56 of the Banking Regulation Act. Because of these violations, RBI decided that cancelling the license was necessary.
RBI has also requested the Registrar of Cooperative Societies in Karnataka to officially shut down the bank and appoint a liquidator, who will handle the bank’s assets.
What Will Happen to Depositors?
Depositors need not worry. The Deposit Insurance and Credit Guarantee Corporation (DICGC) will provide insurance of up to ₹5 lakh per account holder.
RBI has confirmed that 92.9% of the bank’s depositors will get their full money back.
As of 30 June 2025, DICGC has already paid ₹37.79 crore to eligible depositors.
RBI said that due to the bank’s poor financial condition, allowing it to continue operations would not be in the public interest, which is why the license was cancelled.
