In a decisive move aimed at protecting depositors, the Reserve Bank of India has revoked the banking license of Lucknow-based HCBL Co-operative Bank. With operations frozen and liquidation imminent, over 98% of depositors are expected to receive their insured funds through DICGC.
Financial Instability and Regulatory Non-Compliance Led to RBI Crackdown
In a significant regulatory action, the Reserve Bank of India (RBI) on Monday revoked the license of HCBL Co-operative Bank, headquartered in Lucknow. The move sent shockwaves through the city, as thousands of depositors scrambled for clarity on the fate of their savings.
The RBI cited the bank’s lack of adequate capital, continued losses, and the absence of a viable revival plan as key reasons for the cancellation. According to the central bank, HCBL had failed to meet the critical thresholds required under the Banking Regulation Act, 1949.
“It is evident that the bank does not have sufficient earnings prospects or the financial strength to continue operations,” the RBI stated in its release. “Allowing the bank to carry on would not be in the best interests of its depositors.”
With the license revoked, all banking operations have ceased effective immediately—including deposits, withdrawals, and any new transactions.
What Happens to Depositors’ Money?
The RBI’s announcement raised immediate concerns among HCBL’s account holders. However, most depositors are expected to be protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme, which insures up to ₹5 lakh per depositor.
As per the bank’s own records, nearly 98.69% of depositors will receive full reimbursement of their deposits. The DICGC has already disbursed approximately ₹21.24 crore in insured funds as of January 31, 2025.
Depositors don’t need to apply separately for this claim; the DICGC processes payments through the bank’s existing records, minimizing procedural delays. However, for those with deposits exceeding ₹5 lakh, any remaining balance beyond the insured amount may depend on the liquidation proceedings, which typically involve asset recovery and settlement of liabilities over time.
Liquidation Ordered; More Co-operative Banks Under Scanner
The RBI has directed the Co-operative Commissioner and Registrar of Co-operative Societies, Uttar Pradesh, to initiate liquidation proceedings. A liquidator will be appointed to wind down the bank’s operations, recover dues, and manage asset distribution to creditors and depositors with balances exceeding the insured limit.
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This is not an isolated case. In April 2025, the RBI cancelled the licenses of several co-operative banks including Color Merchants Co-operative Bank (Ahmedabad), Ajanta Urban Co-operative Bank (Aurangabad), and Imperial Urban Co-operative Bank (Jalandhar)—all citing similar financial instability and regulatory violations.
Experts say these repeated interventions underscore deeper structural issues within India’s co-operative banking sector. “Many of these institutions suffer from poor governance, undercapitalization, and unchecked lending,” said a senior financial analyst. “The RBI is clearly drawing a line—non-compliance will no longer be tolerated.”