The <a href="https://www.mid-day.com/business/business-news/article/indias-forex-reserves-jump-usd-2-362-billion-to-usd-703-308-billion-says-rbi-23627330" target="_blank" rel="none noopener">Reserve Bank of India</a> (RBI) has cancelled the banking licence of Mumbai-based Sarvodaya Co-operative Bank citing inadequate capital, poor earning prospects and failure to comply with regulatory requirements.
In 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, 2026.
Following 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 liquidator.
The move effectively bars the cooperative bank from conducting any banking-related business, including accepting fresh deposits or repaying existing deposits.
<blockquote class="twitter-tweet">
VIDEO | RBI cancels licence of Mumbai-based Sarvodaya Co-operative Bank. Visuals from outside the bank's Santa Cruz branch.<a href="https://twitter.com/hashtag/MumbaiNews?src=hash&amp;ref_src=twsrc-Etfw">#MumbaiNews</a> <a href="https://twitter.com/hashtag/RBI?src=hash&amp;ref_src=twsrc-Etfw">#RBI</a> <a href="https://twitter.com/hashtag/SarvodayaBank?src=hash&amp;ref_src=twsrc-Etfw">#SarvodayaBank</a> (Full video available on PTI Videos - <a href="https://t.co/n147TvrpG7">https://t.co/n147TvrpG7</a>) <a href="https://t.co/WBpcfDiugI">pic.twitter.com/WBpcfDiugI</a>
&mdash; Press Trust of India (@PTI_News) <a href="https://twitter.com/PTI_News/status/2054428345207751160?ref_src=twsrc-Etfw">May 13, 2026</a></blockquote>

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<h2>RBI cites weak financial health and regulatory violations</h2>
<a href="https://www.mid-day.com/business/business-news/article/rbi-absorbs-nearly-half-of-governments-bond-supply-through-omo-purchases-in-fy26-to-support-liquidity-23617066" target="_blank" rel="none noopener">The RBI </a>said the decision was taken after assessing the bank&rsquo;s financial position and operational viability.
According to the central bank, Sarvodaya Cooperative Bank no longer had sufficient capital or sustainable earning potential to continue operating safely within the banking system.
The RBI further stated that allowing the bank to continue operations would adversely affect public interest, particularly the interests of depositors.
&ldquo;Public interest would be adversely affected if the bank is allowed to carry on its banking business any further,&rdquo; the RBI said in its statement.
<a href="https://www.mid-day.com/mumbai/mumbai-news/article/rbi-report-says-npas-of-indian-banks-fell-to-multi-decadal-low-of-2-1-per-cent-23609794" target="_blank" rel="none noopener">The central bank</a> also noted that the lender had failed to comply with several regulatory norms and supervisory requirements.
<h2>Depositors eligible for insurance cover up to Rs 5 lakh</h2>
The RBI clarified that depositors of the bank would be protected under the deposit insurance scheme operated by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Under existing rules, every depositor is entitled to receive insurance coverage of up to Rs 5 lakh on their deposits.
The central bank said that based on data submitted by the cooperative bank, around 98.36 per cent of depositors were eligible to receive the full amount of their deposits through the insurance mechanism at the time all-inclusive directions were imposed on the lender.
According to RBI data, the DICGC had already paid Rs 26.72 crore towards insured deposits as of March 31, 2026.
<h2>Banking operations halted after licence cancellation</h2>
Following the cancellation order, Sarvodaya Cooperative Bank has been prohibited from carrying out banking activities with immediate effect.
This includes acceptance of deposits, repayment of deposits and all other routine <a href="https://www.mid-day.com/mumbai/mumbai-news/article/thane-rbi-imposes-rs-2-lakh-penalty-on-tdcc-bank-for-sanctioning-loan-to-its-director-23326351" target="_blank" rel="none noopener">banking operations</a>.
The winding-up process will now be overseen by authorities appointed by the Maharashtra cooperative department.
Officials said depositors eligible under the DICGC insurance framework would receive payments through the liquidation process as per applicable procedures.
<h2>Cooperative banking sector under continued scrutiny</h2>
The action against Sarvodaya Cooperative Bank comes amid continued regulatory scrutiny of cooperative banks across India.
In recent years, the RBI has tightened oversight of urban cooperative banks following multiple cases involving weak governance, financial instability and liquidity concerns.
The 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 stability.
(With inputs from PTI)

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