Reserve Bank of India (RBI) has cancelled the licence of Karnataka-based Karwar Urban Co-operative Bank as it lacks adequate capital and earning prospects.

“Consequently, the bank ceases to carry on banking business, with effect from the close of business on 23 July 2025,” the RBI said.

The RBI has requested Karnataka’s Registrar of Cooperative Societies to issue an order for winding up the bank and appoint a liquidator for the lender.

On liquidation, depositors will be entitled to receive an insurance claim deposit of up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

As per the data submitted by the bank, 92.9% of the depositors are entitled to receive the full amount of their deposits from DICGC, RBI said.

As of 30 June 2025, DICGC has already paid Rs 37.79 crore of the total insured deposits.

Giving details, the RBI said the cooperative does not have adequate capital and earning prospects.

"The bank with its present financial position would be unable to pay its present depositors in full," it said.

The RBI also said that the continuance of the bank is prejudicial to the interests of its depositors.