The Reserve Bank on Tuesday cancelled the licence of city-based Sarvodaya Co-operative Bank due to a lack of adequate capital and earning prospects.

Consequently, the bank ceases to carry on banking business, with effect from the close of business on May 12, 2026, it said in a statement.

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 ₹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 central bank said.

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

Giving reasons for the cancellation of the licence, the RBI said Sarvodaya Co-operative Bank, with its present financial position, would be unable to pay its current depositors in full.

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

Consequent to the cancellation of its licence, Sarvodaya Co-operative Bank has been prohibited from conducting the business of ‘banking’, which includes, among other things, acceptance of deposits and repayment of deposits.

(Except for the headline, Fortune India has not edited the content of this PTI report.)