RBI Cancels Sarvodaya Co-operative Bank Licence Over Inadequate Capital and Non-Compliance
Why it matters
The Reserve Bank of India stopped Sarvodaya Co-operative Bank from conducting further business on May 12, 2026, invoking powers under Section 22 read with Section 56 of the Banking Regulation Act, 1949. The regulator determined that the bank's current financial position rendered it unable to pay its depositors in full. Consequently, the Commissioner for Cooperation and Registrar of Cooperative Societies in Maharashtra has been asked to begin winding up proceedings and appoint a liquidator.
The bank failed multiple regulatory benchmarks, specifically Section 11(1) regarding capital and reserves, and several sub-sections of Section 22(3) concerning licence maintenance. The cessation of business means the bank can no longer accept or repay deposits outside of the formal liquidation process. For account holders, the safety net is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which insures individual deposits up to a ₹5 lakh limit. According to bank data, 98.36% of depositors are entitled to receive their full deposit amounts via this insurance mechanism.
Glossary
Term: DICGC: Deposit Insurance and Credit Guarantee Corporation, an RBI subsidiary that provides insurance for bank deposits.
Term: Section 5(b) of BR Act: The legal definition of 'banking' as the acceptance of deposits for lending or investment purposes.
NaukriSync Exam Angle
Banking and Financial Regulations. Key facts: The DICGC provides a monetary insurance ceiling of ₹5,00,000 per depositor. Exam questions often focus on the specific sections of the Banking Regulation Act, 1949 (Sections 11 and 22) used by the RBI to monitor and regulate the solvency of Urban Co-operative Banks (UCBs).