The Reserve Bank of India has cancelled the licence of Mumbai-based Sarvodaya Co-operative Bank due to inadequate capital and earning prospects.

Explaining the need for this extreme measure, the RBI said Sarvodaya Co-operative Bank, with its present financial position, would be unable to pay its current depositors in full.

The bank thus ceases to carry on banking business, with effect from the close of business on 12 May 2026. This means that it has been barred from acceptance of deposits and repayment of deposits, among other things.

"Public interest would be adversely affected if the bank is allowed to carry on its banking business any further," RBI said, adding that the lender has failed to comply with several regulatory requirements.

The RBI has asked the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, to issue an order for the winding up of the bank and to appoint a liquidator.

On liquidation, every depositor would be entitled to receive the deposit insurance claim amount of his/her deposits up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

"As per the data submitted by the bank, about 98.36% of the depositors were entitled to receive the full amount of their deposits from DICGC as on the date of imposition of All Inclusive Directions," the RBI said.

As on 31 March 2026, DICGC has paid Rs 26.72 crore of the total insured deposits.