RBI cancels Mumbai’s Sarvodaya Co op Bank licence; deposits insured up to ₹5 Lakh

The Reserve Bank of India (RBI) has cancelled the licence of Mumbai-based Sarvodaya Co-operative Bank Ltd. due to inadequate capital, poor earnings prospects, and concerns over depositor safety, according to an official statement issued on May 12, 2026. 

The RBI said the cancellation of licence comes into effect from the close of business on May 12, following which the bank will no longer be permitted to conduct banking operations. The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, has also been asked to issue an order for winding up the bank and appoint a liquidator. 

In its press release, the central bank said the co-operative bank failed to comply with several provisions of the Banking Regulation Act, 1949. The RBI noted that the lender did not have adequate capital and viable earning prospects and was unable to meet various regulatory requirements related to banking operations. 

The RBI further stated that allowing the bank to continue its banking business would be prejudicial to public interest and harmful to depositors. According to the regulator, the bank’s current financial position means it would not be able to repay existing depositors in full. 

Consequent to the licence cancellation, Sarvodaya Co-operative Bank has been prohibited from carrying out any banking activity, including accepting fresh deposits and repaying deposits, with immediate effect. 

The RBI, however, clarified that depositors remain protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) framework. Every depositor will be eligible to receive insurance coverage of up to ₹5 lakh on deposits, subject to provisions of the DICGC Act, 1961. 

According to data submitted by the bank, nearly 98.36% of depositors were entitled to receive the full amount of their insured deposits as of the date when restrictions were imposed on the bank. The RBI also said that DICGC had already paid ₹26.72 crore towards insured deposits as of March 31, 2026, based on claims received from eligible depositors. 

The move reflects the RBI’s continued efforts to tighten supervision of financially stressed co-operative banks and safeguard depositor interests within the banking system.