RBI cancels licence of Mumbai-based Sarvodaya Cooperative Bank over weak financial position

The Reserve Bank of India RBI has cancelled the banking licence of Mumbaibased Sarvodaya Cooperative Bank citing inadequate capital poor earning prospects and failure to comply with regulatory requirementsIn a statement issued on Tuesday the central bank said the bank would cease carrying out banking operations with effect from the close of business on May 12 2026Following the cancellation of the licence the RBI has directed the Commissioner for Cooperation and Registrar of Cooperative Societies in Maharashtra to initiate the process for winding up the bank and appointing a liquidatorThe move effectively bars the cooperative bank from conducting any bankingrelated business including accepting fresh deposits or repaying existing depositsVIDEO RBI cancels licence of Mumbaibased Sarvodaya Cooperative Bank Visuals from outside the banks Santa Cruz branchMumbaiNews RBI SarvodayaBankFull video available on PTI Videos httpstcon147TvrpG7 pictwittercomWBpcfDiugImdash Press Trust of India PTI_News May 13 2026RBI cites weak financial health and regulatory violationsThe RBI said the decision was taken after assessing the bankrsquos financial position and operational viabilityAccording to the central bank Sarvodaya Cooperative Bank no longer had sufficient capital or sustainable earning potential to continue operating safely within the banking systemThe RBI further stated that allowing the bank to continue operations would adversely affect public interest particularly the interests of depositorsldquoPublic interest would be adversely affected if the bank is allowed to carry on its banking business any furtherrdquo the RBI said in its statementThe central bank also noted that the lender had failed to comply with several regulatory norms and supervisory requirementsDepositors eligible for insurance cover up to Rs 5 lakhThe RBI clarified that depositors of the bank would be protected under the deposit insurance scheme operated by the Deposit Insurance and Credit Guarantee Corporation DICGCUnder existing rules every depositor is entitled to receive insurance coverage of up to Rs 5 lakh on their depositsThe central bank said that based on data submitted by the cooperative bank around 9836 per cent of depositors were eligible to receive the full amount of their deposits through the insurance mechanism at the time allinclusive directions were imposed on the lenderAccording to RBI data the DICGC had already paid Rs 2672 crore towards insured deposits as of March 31 2026Banking operations halted after licence cancellationFollowing the cancellation order Sarvodaya Cooperative Bank has been prohibited from carrying out banking activities with immediate effectThis includes acceptance of deposits repayment of deposits and all other routine banking operationsThe windingup process will now be overseen by authorities appointed by the Maharashtra cooperative departmentOfficials said depositors eligible under the DICGC insurance framework would receive payments through the liquidation process as per applicable proceduresCooperative banking sector under continued scrutinyThe action against Sarvodaya Cooperative Bank comes amid continued regulatory scrutiny of cooperative banks across IndiaIn recent years the RBI has tightened oversight of urban cooperative banks following multiple cases involving weak governance financial instability and liquidity concernsThe central bank has repeatedly stressed the importance of stronger compliance standards better risk management and adequate capital buffers in the cooperative banking sector to protect depositors and maintain financial stabilityWith inputs from PTI