The Reserve Bank of India (RBI) has cancelled the banking licence of Karnataka based Karwar Urban Co-operative Bank. Following the cancellation, the bank ceased all banking operations effective from the close of business on July 23, 2025.
However, under the provisions of the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961, each depositor is entitled to receive up to Rs 5 lakh of their deposits.
As per data submitted by the bank, 92.90% of its depositors will receive the full insured amount. As of June 30, 2025, the DICGC has already disbursed Rs 37.79 crore to eligible depositors.
The RBI has also requested the Registrar of Cooperative Societies, Karnataka, to initiate the winding-up process and appoint a liquidator for the bank.
The RBI cited several critical reasons for the licence cancellation. The bank lacks adequate capital and earning prospects, thereby failing to comply with key provisions of the Banking Regulation Act, 1949, notably Sections 11(1), 22(3)(a) to 22(3)(e), and Section 56.
The central bank also observed that the bank’s continued operations would be detrimental to the interests of depositors, as it is unable to repay them in full given its present financial condition.
