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RBI Shuts Karwar Bank: The Reserve Bank of India has moved decisively, withdrawing permissions from Karnataka’s Karwar Urban Co-operative Bank. The regulator found that the lender was critically undercapitalized, with no realistic paths to profitability. The persistent adverse situation left the RBI no choice. Following its order, Karwar Urban Co-operative Bank must cease all banking operations by July 23, 2025. Once that deadline passes, Karwar’s customers will find their accounts frozen—they will no longer be able to make fresh deposits or process withdrawals through the bank’s branches.
Customers will be able to claim amounts of up to Rs. 5 lakh through DICGC.
The Reserve Bank announced on Wednesday that the Registrar of Cooperative Societies, Karnataka, has been asked to issue an order for the closure of the bank and to appoint a liquidator. Once liquidation takes effect, each depositor will be eligible for insurance of up to Rs. 5 lakh on their total deposits from the Deposit Insurance and Credit Guarantee Corporation. According to statistics the bank has submitted, 92.9 per cent of depositors fall within the coverage limit and will be reimbursed the full value of their deposits. In effect, 92.9 per cent of Karwar Urban Co-operative Bank’s account holders have balances under the Rs. 5 lakh ceiling, and they will receive the entire sum out of their accounts through DICGC.
Long before this decision, the RBI had already revoked the licenses of several banks.
The DICGC has disbursed ₹37.79 crore so far, covering insured deposits up to June 30, 2025. The RBI also indicated that the cooperative society lacks sufficient capital and future profitability. It is worth remembering that the central bank had previously shut down a number of banks. Among those that lost their licenses were HCBL Co-operative Bank in Lucknow, the Color Merchants Co-operative Bank in Ahmedabad, Ajanta Urban Co-operative Bank in Aurangabad, and Imperial Urban Co-operative Bank in Jalandhar.
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