Banking and Credit
The Reserve Bank of India, vide order dated 16 June 2026, cancelled the licence of Shree Mahalaxmi Urban Co-operative Credit Bank Ltd. under Section 22 read with Section 56 of the Banking Regulation Act, 1949. The cancellation takes effect at the close of business on 18 June 2026, after which the bank must cease all banking activities. The Registrar of Co‑operative Societies, Karnataka has been instructed to issue a winding‑up order and appoint a liquidator for the bank.
The RBI cited several deficiencies: (i) inadequate capital and earnings, breaching Section 11(1) and Section 22(3)(d); (ii) non‑compliance with Sections 22(3)(a)‑(e); (iii) continuation would prejudice depositors; (iv) the bank’s financial position would prevent full repayment to depositors; and (v) public interest would be adversely affected.
Consequent to the licence cancellation, the bank is prohibited from conducting any banking business, including acceptance and repayment of deposits as defined in Section 5(b) read with Section 56, with immediate effect.
Financial Stability and Inclusion
On liquidation, each depositor is entitled to a deposit‑insurance claim up to ₹5,00,000 under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961. According to data submitted by the bank, about 97.90 % of depositors were eligible to receive the full insured amount as of the date of the All‑Inclusive Directions. As of 9 June 2026, DICGC had already disbursed ₹88.21 crore of the total insured deposits under Section 18A of the DICGC Act, based on the willingness received from the concerned depositors.
Regulatory and Policy Measures
The RBI’s action underscores its commitment to enforce capital adequacy, earnings viability, and depositor protection standards under the Banking Regulation Act. By directing the Registrar of Co‑operative Societies to initiate winding‑up and appoint a liquidator, the RBI ensures an orderly resolution process while safeguarding depositor interests through the DICGC insurance mechanism.
The cancellation reflects a regulatory stance that banks lacking sufficient capital and compliance cannot continue operations, thereby protecting the stability of the cooperative banking sector.