RBI Cancels Licence of Lucknow Co-Op Bank; 98% Depositors Eligible for ₹5 Lakh Insurance
Lucknow: Reserve Bank of India (RBI) has cancelled the banking licence of Indian Mercantile Co-operative Bank Ltd., Lucknow with effect from the close of business on February 13, 2026.
The central bank issued the cancellation order on February 11, 2026, under the provisions of Section 22 read with Section 56 of the Banking Regulation Act, 1949. Following the action, the bank has been barred from conducting any banking operations, including accepting or repaying deposits.
Reasons for Cancellation
According to RBI, the licence was cancelled due to multiple regulatory deficiencies, including:
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Inadequate earning prospects
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Non-compliance with key provisions of the Banking Regulation Act
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Failure to meet statutory conditions required for carrying on banking business
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Risk to the interests of depositors
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Adverse impact on public interest if operations were allowed to continue
The RBI stated that the bank did not meet the requirements under Sections 22(3)(b), 22(3)(c), 22(3)(d), and 22(3)(e) read with Section 56 of the Act.
Winding-Up Process Initiated
The RBI has requested the Commissioner and Registrar of Cooperative, Uttar Pradesh, to initiate winding-up proceedings and appoint a liquidator for the bank.
Relief for Depositors
On liquidation, depositors will be eligible to receive insurance cover of up to ₹5 lakh under the Deposit Insurance scheme managed by the Deposit Insurance and Credit Guarantee Corporation (DICGC), as per the DICGC Act, 1961.
As per data submitted by the bank:
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Around 98.75% of depositors are entitled to receive the full amount of their deposits within the insured limit.
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As of December 31, 2025, DICGC has already disbursed ₹2.90 crore towards insured deposits under Section 18A of the DICGC Act, based on claims received from eligible depositors.
Impact
With the cancellation now in effect, the bank can no longer carry on the business of banking, including accepting deposits or processing repayments. Depositors are advised to coordinate with the appointed liquidator and DICGC for claim settlements.
The RBI has reiterated that regulatory action is taken in the interest of safeguarding depositors and maintaining financial stability.