In a significant regulatory move, the Reserve Bank of India (RBI) has cancelled the banking licence of Color Merchants Co-operative Bank, based in Ahmedabad. The apex bank announced the decision on Wednesday, citing the bank’s inadequate capital base and lack of earning prospects as major reasons behind the action.
According to the RBI, the financial condition of the bank had deteriorated to a point where it could no longer ensure the protection of its depositors. “The bank, with its current financial position, is unable to pay its present depositors in full, and its continued operation would be detrimental to public interest,” the central bank said in an official statement.
Following the cancellation of the licence, the Registrar of Co-operative Societies, Gujarat, has also been requested to issue an order for the bank’s closure and to appoint a liquidator.
As the news spreads, depositors have expressed concern about the safety of their hard-earned savings. However, the RBI has clarified that under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme, each depositor is entitled to receive up to ₹5 lakh as insurance coverage on their deposits.
Encouragingly, the RBI noted that according to the data submitted by the bank, around 98.51% of the depositors are eligible to receive their full insured amount from DICGC. As of March 31, 2024, a total of ₹13.94 crore has already been disbursed by DICGC to eligible depositors based on their submitted claims.
The RBI further revealed that the cooperative bank had failed to comply with several provisions of the Banking Regulation Act, and allowing it to continue operations would have posed a serious risk to public funds.
Following the cancellation, the bank ceased all operations, including deposit acceptance and repayment, from April 16, 2025.