RBI Revives Licence Cancellation of Shimsha Sahakara Bank after Karnataka High Court Dismisses Petition
Moneylife Digital Team 06 March 2026
Reserve Bank of India (RBI) has revived its earlier order cancelling the banking licence of Shimsha Sahakara Bank Niyamitha, a cooperative bank based in Maddur in Karnataka’s Mandya district, after the related writ petition challenging the decision was withdrawn before the Karnataka High Court. As a result, the lender is now barred from conducting any banking operations with immediate effect.
 
In a statement, RBI says it had originally cancelled Shimsha Sahakara Bank's licence through a speaking order dated 5 July 2024. Following the cancellation, the lender had ceased carrying on banking business from the close of business on the same day.
 
Subsequently, the regulator extended certain regulatory directions imposed on Shimsha Sahakara Bank following the Karnataka High Court's interim order on 25 July 2024 in Writ Petition No. 19767 of 2024. The directive, originally issued on 23 February 2023, had been extended from time to time, most recently until the close of business on 24 May 2026 through a press release issued on 20 November 2025.
 
However, the legal proceedings came to an end after the High Court, through an order dated 17 February 2026, dismissed the writ petition as withdrawn. With the petition no longer pending, the RBI’s earlier order cancelling Shimsha Sahakara Bank's licence has now come back into force.
 
Consequently, Shimsha Sahakara Bank is prohibited from conducting the business of banking as defined under Section 5(b) read with Section 56 of the Banking Regulation Act, 1949. The prohibition also extends to other activities permitted to banks under Section 6 of the Act.
 
RBI says the restrictions take effect immediately, effectively preventing the cooperative bank from undertaking any form of banking or related financial business.
 
RBI had earlier cited that Shimsha Sahakara Bank's weak financial position, inadequate capital and poor earnings prospects as key reasons for cancelling its licence. The regulator had also said that allowing the bank to continue operations would be detrimental to the interests of depositors and the public.
 
Following the cancellation, depositors of the bank remain eligible to receive insurance cover of up to ₹5 lakh on their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC), in line with the deposit insurance scheme.
 
The move marks the final regulatory step in the closure process of the cooperative bank after the resolution of the legal dispute.
 
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