RBI Revokes License of Mumbai-based Sarvodaya Co-operative Bank

The Reserve Bank of India (RBI) has cancelled the banking license of Sarvodaya Co-operative Bank, Mumbai, effective from May 12, 2026, due to inadequate capital and poor earning prospects.
The bank failed to comply with the requirements of Sections 22(4) and 56 of the Banking Regulation Act, 1949, making it unable to pay its present depositors in full.
Upon liquidation, every depositor is entitled to receive a deposit insurance claim amount of up to ₹5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The bank is strictly prohibited from conducting any 'banking' business, including the acceptance and repayment of deposits, with immediate effect.
Exam Perspective: This regulatory action underscores the RBI's commitment to maintaining financial stability by weeding out insolvent urban co-operative banks (UCBs) that pose a risk to the banking system.

Key Facts / Static GK

DICGC Act Year: 1961
DICGC Insurance Limit: ₹5 Lakh
Banking Regulation Act Year: 1949

Q Practice Quiz — 14 May 2026

1. What is the primary objective of the 'GARUDA' framework proposed by SEBI?

A To provide insurance cover to small-scale investors in AIFs

B To mandate the appointment of merchant bankers for all fund launches

C To fast-track the approval and launch process of AIF schemes

D To restrict foreign investment in Indian Alternative Investment Funds

E To increase the minimum investment threshold for retail investors

Explanation: The GARUDA (Green-Channel AIF Rollout Upon Document Acknowledgement) framework is a fast-track approval mechanism intended to reduce regulatory delays and allow AIFs to launch within 10 working days instead of the current 30 days.

2. The RBI cancelled the license of Sarvodaya Co-operative Bank under which sections of the Banking Regulation Act, 1949?

A Sections 11 and 35

B Sections 22(4) and 56

C Sections 45 and 42

D Sections 10 and 21

E Sections 49 and 50

Explanation: The RBI cancelled the bank's license specifically under Sections 22(4) and 56 of the Banking Regulation Act, 1949, which deal with the licensing of banking companies and their application to co-operative societies.

3. Which of the following statements is true regarding the newly notified VB-G RAM G Act, 2025?

A It reduces the guaranteed employment days to 80 per year.

B It completely removes the Direct Benefit Transfer (DBT) mechanism.

C It replaces the MGNREGA Act, 2005 and increases guaranteed work to 125 days.

D It is only applicable to urban households.

E The maximum payment timeline under this act is 45 days.

Explanation: The VB-G RAM G Act replaces MGNREGA and enhances the employment guarantee from 100 to 125 days annually.

4. How will the Bharat Maritime Insurance Pool (BMIP) settle claims exceeding USD 100 million?

A Through mandatory contributions from the shipping companies

B By utilizing the sovereign guarantee provided by the government

C By seeking immediate funds from the World Bank

D Through a special levy on all imported maritime cargo

E Claims above USD 100 million are not covered under BMIP

Explanation: For claims up to USD 100 million, the pool uses its own resources. Claims exceeding this amount are supported by the sovereign guarantee after pool reserves and reinsurance are exhausted.

5. According to the Moody's May 2026 update, what is the revised GDP growth forecast for India for CY2027?

A 6.8%

B 6.5%

C 7.2%

D 6.0%

E 5.5%

Explanation: Moody's reduced India's growth projection for CY2027 by 50 basis points to 6.0% (down from the previous forecast of 6.5%).

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RBI Revokes License of Mumbai-based Sarvodaya Co-operative Bank

Key Facts / Static GK

Q Practice Quiz — 14 May 2026

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