RBI cancels Yashwant Co-operative Bank licence; 99% depositors fully covered
Synopsis
The RBI has cancelled the licence of Yashwant Co-operative Bank, Phaltan, just a week after shutting down Sarvodaya Co-operative Bank — the second cooperative lender closure in seven days. With 99% of depositors fully covered under DICGC and ₹106.96 crore already paid out, the regulator's message is clear: undercapitalised cooperative banks are on notice.
Key Takeaways
The RBI cancelled the licence of Yashwant Co-operative Bank, Phaltan, Maharashtra on 19 May 2026 over inadequate capital and poor earning prospects.
The bank is prohibited from all banking operations, including accepting and repaying deposits, with immediate effect.
About 99.02% of depositors are entitled to receive the full amount of their deposits via DICGC insurance of up to ₹5 lakh .
The DICGC had already paid ₹106.96 crore to depositors as of 20 April 2026 .
The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has been directed to wind up the bank and appoint a liquidator.
The RBI had cancelled the licence of Sarvodaya Co-operative Bank on 12 May 2026 on the same grounds — the second such closure in a week.
The Reserve Bank of India (RBI) on 19 May 2026 cancelled the banking licence of The Yashwant Co-operative Bank, Phaltan, Maharashtra, citing inadequate capital and poor earning prospects. The bank has been barred from conducting any banking operations — including accepting and repaying deposits — with immediate effect from the close of business on 19 May 2026.
Why the RBI Pulled the Licence
The central bank stated that Yashwant Co-operative Bank failed to comply with the provisions of the Banking Regulation Act and that its continued operation would be prejudicial to depositor interests. The RBI further noted that the bank, in its present financial condition, would be unable to repay its depositors in full, making its closure necessary in the public interest.
What Happens to Depositors
Upon liquidation, every depositor will be eligible to claim up to ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). According to data submitted by the bank itself, approximately 99.02% of depositors are entitled to receive the full amount of their deposits. The DICGC had already disbursed ₹106.96 crore as of 20 April 2026, indicating that the insurance settlement process was already under way before the formal licence cancellation.
Winding-Up Process Initiated
The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has been directed by the RBI to issue a winding-up order and appoint a liquidator for the bank. This sets in motion a formal resolution process under state cooperative law, with the DICGC-backed insurance framework providing the primary safety net for retail depositors.
Part of a Broader Pattern
This is not an isolated action. The RBI had, on 12 May 2026, cancelled the licence of Sarvodaya Co-operative Bank on identical grounds — insufficient capital and inadequate earning prospects. The back-to-back closures within a week underscore the regulator's sustained focus on cleaning up the financially weak cooperative banking sector, which has historically operated with lower oversight than scheduled commercial banks. Notably, cooperative banks have faced recurring stress, with several high-profile collapses — including PMC Bank — prompting regulatory tightening in recent years.
What Comes Next
Depositors of Yashwant Co-operative Bank who have not yet received their DICGC claims are advised to approach the liquidator once appointed. The RBI's action signals continued regulatory intolerance for undercapitalised cooperative lenders, and further licence reviews across Maharashtra's cooperative banking network cannot be ruled out.
Point of View
Not coincidence. The cooperative banking sector — spread across thousands of small, politically connected institutions — has long been the weakest link in India's financial architecture. The DICGC coverage of 99% of depositors is reassuring optics, but it also masks a deeper question: why were these banks allowed to deteriorate to this point before action was taken? Proactive intervention, not post-collapse insurance, is the standard the RBI should be held to.
NationPress
8 Aug 2026
Frequently Asked Questions
Why did the RBI cancel Yashwant Co-operative Bank's licence?
The RBI cancelled the licence because the bank lacked adequate capital and earning prospects and had failed to comply with the Banking Regulation Act. Its continued operation was deemed prejudicial to depositor interests and against the public interest.
What will happen to depositors of Yashwant Co-operative Bank?
Depositors are entitled to claim up to ₹5 lakh each from the DICGC upon liquidation of the bank. According to the bank's own data, about 99.02% of depositors will receive the full amount of their deposits.
Has the DICGC already started paying depositors?
Yes. The DICGC had already disbursed ₹106.96 crore to depositors as of 20 April 2026, before the formal licence cancellation on 19 May 2026.
What is the winding-up process for the bank?
The RBI has directed the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra to issue a winding-up order and appoint a liquidator. The liquidator will oversee the settlement of remaining claims.
Is this the only cooperative bank the RBI has recently shut down?
No. The RBI had cancelled the licence of Sarvodaya Co-operative Bank on 12 May 2026 — just one week earlier — on the same grounds of inadequate capital and poor earning prospects, marking two cooperative bank closures within a week.
