Sarvodaya Cooperative Bank’s Licence Cancelled by RBI, Depositors Eligible for ₹5 Lakh Insurance Cover

Moneylife Digital Team 13 May 2026

Investor Interest

Reserve Bank of India (RBI) has cancelled the licence of Mumbai-based Sarvodaya Cooperative Bank Ltd, citing inadequate capital, weak earnings prospects and continued non-compliance with provisions of the Banking Regulation Act. The banking regulator directed the lender to cease all banking operations from 12 May 2026, effectively bringing down the curtain on the troubled cooperative bank’s operations.

In a strongly worded statement, RBI says the continuation of the Bank was ‘prejudicial to the interests of its depositors’ and warned that the lender, in its present financial condition, would be unable to repay depositors in full. The central bank also observed that allowing the cooperative bank to continue its banking business would adversely affect public interest.

With the cancellation of its certificate of registration (CoR), Sarvodaya Cooperative Bank can no longer carry out banking activities, including accepting fresh deposits or permitting withdrawals and repayments.

RBI, however, sought to reassure depositors by stating that eligible customers would receive deposit insurance coverage of up to ₹5 lakh through the Deposit Insurance and Credit Guarantee Corporation (DICGC). According to data submitted by the Bank, around 98.36% of depositors are expected to receive the full amount of their insured deposits.

The banking regulator further disclosed that, as of 31 March 2026, DICGC had already disbursed ₹26.72 crore towards insured deposits based on claims and willingness received from depositors of the Mumbai-based lender.

The cancellation marks the culmination of regulatory action that began in April 2024, when RBI had imposed severe operational restrictions on Sarvodaya Cooperative Bank after detecting a sharp deterioration in its financial health. Acting under Section 35A of the Banking Regulation Act, the central bank had barred the lender from granting or renewing loans, accepting fresh deposits, making investments or incurring fresh liabilities without prior approval.

At the time, depositors were allowed to withdraw only up to ₹15,000 from their accounts, subject to specific conditions, as RBI attempted to contain the fallout while assessing the Bank’s viability.

RBI had then clarified that the restrictions should not be viewed as cancellation of Sarvodaya Cooperative Bank licence and stated that the lender would continue operating under close supervisory monitoring until its financial position improved.

However, with Sarvodaya Cooperative Bank failing to revive its finances or meet regulatory requirements, the central bank has now opted for the harshest regulatory action, cancellation of licence and eventual liquidation proceedings.

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