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.

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.