RBI Cancels This Bank License, Transactions and Withdrawals Affected

RBI: RBI took big step. On Tuesday, the Reserve Bank of India revoked the licence of Sarvodaya Co-operative Bank, located in Mumbai, due to insufficient capital and earning potential. Consequently, the bank will stop its banking operations starting from the end of business on May 12, 2026, according to a statement.

This means that customers of Sarvodaya Co-operative Bank will no longer have the ability to withdraw or deposit funds in their accounts. After the bank’s closure, each customer (depositor) will be eligible to claim a deposit insurance amount of up to Rs 5 lakh on their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

A remarkable 98.36 percent of customers will receive the full amount they have deposited in their accounts. The Reserve Bank has instructed the Cooperative Commissioner and the Registrar of Cooperative Societies in Maharashtra to issue a winding-up order for the bank and appoint a liquidator. Following the bank’s closure, each customer (depositor) will be entitled to receive a deposit insurance claim amount of up to Rs 5 lakh on their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

“According to the data provided by the bank, as of the date when the comprehensive directions were implemented, around 98.36 percent of depositors were eligible to receive the full amount of their deposits from the DICGC,” stated the central bank. As of March 31, 2026, the DICGC has already disbursed Rs 26.72 crore from the total insured deposits.

The bank did not meet several regulatory standards. In explaining the reasons for the licence cancellation, the central bank indicated that Sarvodaya Co-operative Bank, given its current financial status, would not be able to repay the full amount to its existing depositors. “Allowing the bank to continue its banking operations would negatively impact public interest,” the Reserve Bank remarked.

What will happen to your deposited money?

Upon closure of the bank, every depositor is entitled to receive a deposit insurance claim amount of up to Rs 5 lakh on their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC). “As per the data submitted by the bank, as on the date of implementation of the all-inclusive directions, approximately 98.36% of the depositors were entitled to receive the full amount of their deposits from the DICGC,” the central bank said.

The Reserve Bank said the bank had failed to comply with several regulatory requirements. Consequent to the cancellation of licence, Sarvodaya Co-operative Bank has been prohibited from carrying on the business of ‘banking’, which, inter alia, includes accepting deposits and repaying deposits.