What changed
RBI cancelled the bank's licence under Section 22 read with Section 56 of the Banking Regulation Act, 1949, effective June 18, 2026. The bank must cease all banking activities, including accepting and repaying deposits. The Registrar of Co-operative Societies, Karnataka, has been asked to wind up the bank and appoint a liquidator.
What it means for you
This action signals RBI's zero tolerance for urban co-operative banks that fail capital adequacy and viability norms. For lenders, it reinforces the importance of maintaining minimum capital under Section 11(1) and complying with all licensing conditions. Depositors of such failed banks rely on DICGC cover, which here covers nearly all depositors fully.
What you must do
- Review your bank's capital adequacy and earnings prospects regularly to avoid regulatory action.
- Ensure strict compliance with all provisions of the Banking Regulation Act, especially Sections 11 and 22.
- Educate depositors about DICGC insurance limits and claim processes to manage expectations.
- Monitor co-operative banks in your network for early warning signs of financial distress.
Who it affects
Shree Mahalaxmi Urban Co-operative Credit Bank Ltd. depositors, Urban co-operative banks in Karnataka, DICGC and the Registrar of Co-operative Societies, Karnataka, All co-operative banks under RBI supervision
Why did RBI cancel this bank's licence?
The bank lacked adequate capital and earning prospects, violating Section 11(1) and Section 22(3)(d) of the Banking Regulation Act. Its continued operation would harm depositor interests and public confidence.
What happens to my deposits now?
You can claim up to ₹5 lakh per depositor from DICGC. As of June 9, 2026, DICGC has already paid ₹88.21 crore to depositors who consented. About 97.90% of depositors are entitled to full repayment.
Can the bank still operate after licence cancellation?
No. The bank is prohibited from conducting any banking business, including accepting or repaying deposits, effective June 18, 2026. A liquidator will be appointed to wind it up.