Subject: Indian Mercantile Co-operative Bank Ltd., Lucknow
Date of Order: February 11, 2026 | Effective Date: February 13, 2026
1. Executive Summary
The Reserve Bank of India (RBI) has officially cancelled the banking licence of Indian Mercantile Co-operative Bank Ltd., Lucknow. This regulatory measure effectively prohibits the institution from carrying out any “banking” business, which strictly includes the acceptance and repayment of deposits. Consequently, the Commissioner and Registrar of Cooperative, Uttar Pradesh, has been requested to issue a formal winding-up order and appoint a liquidator to manage the bank’s closure.
2. Key Details
- Regulating Authority: Reserve Bank of India (RBI).
- Statutory Basis: The licence was cancelled under Section 22 read with Section 56 of the Banking Regulation Act, 1949 (BR Act).
- Effective Closure: The bank ceases all banking operations from the close of business on February 13, 2026.
- Depositor Insurance: Every depositor is entitled to a deposit insurance claim up to a monetary ceiling of ₹5,00,000/- from the Deposit Insurance and Credit Guarantee Corporation (DICGC) upon liquidation.
- Overall Depositor Impact: Based on the data submitted, approximately 98.75% of depositors are entitled to receive the full amount of their deposits from DICGC.
- Proactive Settlements: As of December 31, 2025, DICGC had already paid ₹2.90 crore of the total insured deposits under Section 18A of the DICGC Act, 1961, to concerned depositors who provided their willingness.
3. Root Cause Analysis (RCA)
The central bank justified the cancellation based on multiple severe operational and compliance failures:
- Inadequate Earning Prospects: The institution failed to demonstrate viable financial health, putting it in direct violation of Section 22 (3) (d) read with Section 56 of the BR Act, 1949.
- Statutory Non-Compliance: The bank failed to comply with the mandatory requirements outlined in Sections 22 (3) (b), 22(3)(c), 22(3) (d), and 22(3)(e) read with Section 56 of the BR Act, 1949.
- Prejudice to Depositors: The RBI determined that the ongoing continuance of the bank’s operations would be inherently prejudicial to the interests of its depositors.
- Adverse Public Interest: Allowing the bank to carry on its banking business any further would have adversely affected the broader public interest.
4. Preventive Controls
To prevent similar regulatory interventions, cooperative banks must strictly enforce the following controls:
- Continuous Capital and Earnings Monitoring: Implement strict internal controls to continually forecast and audit earning prospects to satisfy the requirements of Section 22 (3) (d) of the BR Act.
- Comprehensive Compliance Auditing: Establish independent oversight mechanisms to verify full compliance with Sections 22(3)(b) through 22(3)(e).
- Depositor Protection Protocols: Develop rigorous risk assessment frameworks to ensure operational decisions never become prejudicial to depositors’ interests.
5. Lessons Learnt
- No Leniency on Financial Viability: The RBI strictly mandates that cooperative banks maintain adequate earning prospects; failure to do so results in the revocation of the banking licence.
- Public Interest Overrides Operations: Regulatory bodies will act decisively to halt business operations if they determine that continuing the banking business adversely impacts public and depositor interests.
- Efficacy of Deposit Insurance: The DICGC framework is a crucial safety net. By securing claims up to ₹5,00,000, 98.75% of depositors in this instance were fully protected from loss. Furthermore, processing claims prior to full liquidation (₹2.90 crore paid by Dec 2025) mitigates sudden financial shocks.