RBI cancels licence of Sarvodaya Co-operative Bank
What happened
RBI cancelled licence of Sarvodaya Co-operative Bank Ltd., Mumbai on May 12, 2026, citing inadequate capital and earning prospects. The bank failed to comply with Banking Regulation Act provisions, making its continuance prejudicial to depositor interests. Commissioner for Cooperation was requested to wind up the bank. DICGC provides deposit insurance up to Rs 5 lakh per depositor. About 98.36% depositors entitled to full coverage. DICGC already paid Rs 26.72 crore to willing depositors by March 31, 2026.
Why it matters
RBI's licence cancellation of Sarvodaya Co-operative Bank represents regulatory enforcement ensuring financial system stability. The decision followed bank's inability to maintain adequate capital adequacy ratios and sustainable earnings, violating Banking Regulation Act requirements. This action protects depositor interests by preventing further financial deterioration. The liquidation process involves Maharashtra's Cooperative Registrar appointing a liquidator for orderly closure. DICGC's deposit insurance mechanism provides crucial safety net, covering deposits up to Rs 5 lakh per account holder. The fact that 98.36% depositors qualify for full insurance coverage indicates the bank primarily served small depositors, highlighting cooperative banks' role in financial inclusion. Pre-emptive DICGC payment of Rs 26.72 crore to willing depositors demonstrates proactive depositor protection. This case illustrates RBI's supervisory powers under Banking Regulation Act to take corrective action when banks pose systemic risks. Cooperative banks, being dual-regulated by RBI and state registrars, face unique regulatory challenges. The cancellation underscores importance of prudential norms compliance and adequate capitalization for banking license maintenance.
Public Sector Banks (PSBs) record an all-time high net profit of ₹1.98 lakh crore in FY 2025–26, marking the fourth straight year of profitability
What happened
Public Sector Banks achieved record net profit of ₹1.98 lakh crore in FY 2025-26, marking fourth consecutive profitable year. This represents significant turnaround from NPA crisis of 2017-18 when PSBs posted losses exceeding ₹87,000 crore. Improved asset quality, better provisioning coverage, and merger consolidation contributed to profitability. State Bank of India, Bank of Baroda, and Punjab National Bank led the recovery. Government's 4R strategy and comprehensive capital infusion enabled this transformation from stressed banking sector to profitable operations.
Why it matters
The PSB profitability surge reflects successful resolution of India's twin balance sheet problem that plagued the banking sector post-2014. The turnaround stems from multiple interventions: government recapitalization of ₹2.11 lakh crore (2017-2020), Insolvency and Bankruptcy Code implementation for faster NPA resolution, and bank consolidation reducing 27 PSBs to 12. Provisioning coverage ratio improved from 48.3% in 2018 to over 75% currently, while gross NPA ratio declined from peak 11.6% to manageable levels. Enhanced credit growth, particularly in retail and MSME segments, boosted interest income. Digital transformation reduced operational costs while improving customer acquisition. The 4R strategy (Recognition, Resolution, Recapitalization, Reform) addressed legacy issues systematically. However, challenges remain: credit concentration in few large borrowers, exposure to volatile sectors like telecom and power, and competition from private banks and NBFCs. The profitability must sustain beyond economic cycles, requiring continued focus on risk management, digital innovation, and prudential lending practices to maintain this positive trajectory.
