RBI cancelled the license of Karnataka's Shree Mahalaxmi Urban Co-operative Credit Bank

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RBI revoked Shree Mahalaxmi Bank's license

Highlights

On June 16, 2026, RBI revoked the license of Shree Mahalaxmi Urban Co-operative Credit Bank, Gokak, Karnataka under the Banking Regulation Act.
From June 18, 2026, the bank is prohibited from conducting banking business, accepting deposits, and making withdrawals, and instructions for liquidation have been issued.
As per your instructions, here is the translation: By June 9, 2026, DICGC has paid out ₹88.21 crore from the insured deposits, and about 97.90% of depositors are fully eligible for insurance.

This article was translated from the original. Read the original version by our correspondent here.

Regulatory Action and Closure Process

Reserve Bank of India, in its notification dated June 16, 2026, has cancelled the license of Shree Mahalaxmi Urban Co-operative Credit Bank Ltd., Gokak, Karnataka under Section 22 and Section 56 of the Banking Regulation Act, 1949. Following this order, the bank cannot conduct banking business after the close of business on June 18, 2026.

RBI has also requested the Registrar of Cooperative Societies, Karnataka, to wind up the bank and appoint a liquidator. With the cancellation of the license, the bank is immediately prohibited from conducting banking business, accepting deposits, or repaying deposits.

The central bank stated that the bank does not have adequate capital and earning prospects. According to RBI, the bank has failed to comply with various statutory requirements of the Banking Regulation Act, and in its current financial position, it is not possible to pay all existing depositors in full.

Impact on Depositors and Insurance Coverage

RBI states that allowing the bank to continue would be detrimental to the interests of depositors and would also negatively impact public interest. This is why the regulator has not permitted the bank to continue its banking business.

In the event of liquidation, each depositor will be entitled to receive deposit insurance claim amounts of up to ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation, DICGC, under the provisions of the DICGC Act, 1961. According to data submitted by the bank, as of the date of imposition of All Inclusive Directions, about 97.90% of depositors were eligible to receive their entire deposits from DICGC.

As of June 9, 2026, DICGC has already paid ₹88.21 crore out of the total insured deposits under Section 18A of the DICGC Act, based on the consent received from the concerned depositors. This indicates that the insurance mechanism for recovery is already active for most retail depositors.

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