Shree Mahalaxmi Bank license cancelled
The Reserve Bank of India cancelled the license of Shree Mahalaxmi Urban Co-operative Credit Bank Ltd. of Gokak, Karnataka, effective June 18, 2026. The bank ceases all banking business due to inadequate capital and non-compliance with regulations.
Capital shortfalls and non-compliance
The Reserve Bank cited several reasons for the cancellation, primarily the bank's inadequate capital and earning prospects, which violate Sections 11(1) and 22(3)(d) read with Section 56 of the Banking Regulation Act, 1949.
The bank also failed to comply with multiple other requirements under Section 22(3) of the Act.
The RBI determined that the bank's continued operation would be detrimental to its depositors' interests and that its current financial state would prevent it from fully repaying its present depositors.
Furthermore, the central bank concluded that public interest would be adversely affected if the bank were permitted to continue its banking business.
Consequently, the bank is now prohibited from conducting any banking activities, including the acceptance and repayment of deposits, with immediate effect.
Depositor protection activated
Upon liquidation, every depositor is entitled to receive an insurance claim of up to ₹5,00,000 (Rupees five lakh) from the Deposit Insurance and Credit Guarantee Corporation (DICGC), in accordance with the DICGC Act, 1961.
Data submitted by the bank shows that approximately 97.90 percent of its depositors were eligible to receive the full amount of their deposits from DICGC.
As of June 09, 2026, DICGC has already disbursed ₹88.21 crore of the total insured deposits to concerned depositors.
The Registrar of Co-operative Societies, Karnataka, has been requested to initiate the winding-up process and appoint a liquidator for the bank.
Safety net in action
The RBI's decisive action underscores its commitment to financial stability and depositor protection, a standard response to a failing institution.
Swift DICGC activation minimizes disruption for most account holders, showcasing India's robust financial safety net.
This sends a clear signal to other co-operative banks about strict capital and compliance enforcement.