India's banking regulator, the Reserve Bank of India (RBI), on Wednesday, 23 July 2025, cancelled the licence of the Karnataka-based Karwar Urban Co-operative Bank due to the institutional lender's lack of earning prospects.
“The Reserve Bank of India (RBI), vide order dated July 22, 2025, has cancelled the licence of The Karwar Urban Co-operative Bank Ltd., Karwar. Consequently, the bank ceases to carry on banking business, with effect from the close of business on July 23, 2025,” said the RBI.
As per the announcement, the Karwar Urban Co-operative Bank will cease to conduct banking business effective the end of business hours on Wednesday, 23 July 2025.
The central bank also flagged that the Karwar Urban Co-operative Bank does not have adequate capital to comply with the provisions of the Banking Regulation Act of 1949.
“The bank does not have adequate capital and earning prospects. As such, it does not comply with the provisions of Section 11(1) and Section 22(3)(d) read with Section 56 of the Banking Regulation Act, 1949,” said RBI in an official release.
RBI has also requested the Registrar of Cooperative Societies, Karnataka, to issue an order for winding up the bank and appoint a liquidator for the institutional lender.
What will happen to the depositors?
Depositors who have parked their money in the Karwar Urban Co-operative Bank will be entitled to receive an insurance claim deposit of up to ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
“The bank with its present financial position would be unable to pay its present depositors in full,” according to the RBI release.
The RBI data also showed that 92.9% of the co-operative bank's depositors are entitled to receive the full amount of their deposits from DICGC.
“As on 30 June 2025, the DICGC has already paid ₹37.79 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961, based on the willingness received from the concerned depositors of the bank,” said the Reserve Bank of India (RBI) in its official release.
RBI also highlighted that, given the current situation of the institutional lender, they have taken the decision to bar the licence of the bank in the matter of public interest.
“Public interest would be adversely affected if the bank is allowed to carry on its banking business any further,” said the banking regulator in the official statement.
