RBI cancels the licence of Sarvodaya Co-operative Bank

• 14 May 2026
• 225 Views

In an order dated 12 May 2026, the Reserve Bank of India (RBI) made a major decision to cancel the license of Mumbai’s Sarvodaya Co-operative Bank Ltd by exercising powers u/s 22 in conjunction with Section 56 of Banking Regulation Act, 1949. As a result of the license cancellation, the bank ceased all its banking operations w.e.f. 12 May 2026. 

The Central Bank requested the Commissioner for Cooperation and Registrar of Cooperative Societies in Maharashtra to issue an order regarding winding-up for the bank and to appoint a liquidator for the same. 

Why did RBI Cancel Sarvodaya Co-operative Bank’s License?

The Central Bank cancelled Sarvodaya Cooperative Bank’s cooperative bank license due to the following reasons:-

• The RBI discovered that the bank did not possess the required capital and earning prospects. It failed to meet the requirements outlined u/s 11(1) and u/s 22(3)(d) in conjunction with section 56 of Banking Regulation Act, 1949. 

• Moreover, the bank failed to comply with the stipulations set forth u/s 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) along with Section 56 of the Banking Regulation Act, 1949. 

• The RBI believed that the continued operation of the bank was detrimental to interests of its depositors. 

• Given its current financial state, the bank would be unable to repay its depositors in full, according to the Central Bank.

• Allowing the bank to continue its operations would adversely affect public interest. Therefore, the RBI decided it was best to cancel the license.

Restrictions on Sarvodaya Co-operative Bank effective from 12 May 2026 

Following the cancellation of its license on 12 May 2026, Sarvodaya Co-operative Bank can no longer engage in any banking activities with immediate effect. It includes the acceptance and repayment of deposits and all other banking activities.

Relief for Depositors from DICGC

When liquidation takes place, every depositor will be entitled to receive a deposit insurance claim amounting to Rs. 5,00,000 (Rupees five lakh only) maximum from Deposit Insurance and Credit Guarantee Corporation (DICGC) in accordance with DICGC Act of 1961 and its provisions. 

As per data provided by the bank, about 98.36% of depositors are eligible to receive full amount of their deposits from DICGC as of the date the All Inclusive Directions were imposed. As of 31 March 2026, the DICGC has already disbursed Rs. 26.72 crore of total insured deposits based on requests received from concerned bank depositors.

Source: RBI