RBI freezes Sri Mahatma Basaveshwar Co-op Bank, Afzalpur; no withdrawals
From October 8, 2026, Sri Mahatma Basaveshwar Co-operative Bank in Afzalpur, Karnataka, cannot lend, take deposits or let depositors withdraw money, for six months.
Official title: Directions under Section 35 A read with Section 56 of the Banking Regulation Act, 1949 – Sri Mahatma Basaveshwar Co-operative Bank Ltd., Afzalpur · Press Release 2026-2027/1286
What happened
RBI has placed Sri Mahatma Basaveshwar Co-operative Bank Ltd., Afzalpur, in Kalaburagi district, Karnataka, under Section 35A directions from the close of business on October 8, 2026. Without RBI's written approval, the bank cannot give or renew loans, make investments, borrow, accept fresh deposits, make payments, or sell its property or assets. It may still pay essential costs such as staff salaries, rent and electricity bills.
Because of the bank's weak cash position, depositors cannot withdraw any amount from savings, current or any other account. The bank may let a customer set off a deposit against a loan they owe it, under conditions in the directions. A copy of the directions must be displayed on the bank's website and at its premises.
RBI says it has worked with the bank's board and senior management for the last few years, but the bank did not make concrete efforts to fix supervisory concerns and protect depositors. The directions last six months, until about April 8, 2027, and will be reviewed. RBI stresses that this is not a cancellation of the bank's licence: it can keep doing banking business within the limits until its finances improve.
What it means for you
If you have money in Sri Mahatma Basaveshwar Co-operative Bank, you cannot withdraw it for now. Eligible depositors can get back up to ₹5 lakh (principal and interest together, per depositor in the same name and capacity) from DICGC deposit insurance, after submitting a willingness form and verification. Ask the bank's officials how to do this, or see dicgc.org.in. If you also have a loan from the bank, ask whether your deposit can be set off against it, and otherwise keep paying your loan.
What it means for businesses
Shops, traders and societies with accounts at Sri Mahatma Basaveshwar Co-operative Bank cannot withdraw money or get new loans there, so they need another bank for daily payments and salaries. Deposits above ₹5 lakh per depositor are not insured, and recovery of the excess depends on what happens to the bank. There is no direct effect on other banks.
Links in this release, explained
- DICGC website
The official site of the Deposit Insurance and Credit Guarantee Corporation. It explains how deposit insurance works and how depositors of a restricted bank can claim up to ₹5 lakh.
www.dicgc.org.in
Read the original
Press release on rbi.org.in ↗ Official PDF ↗
This explainer simplifies the official text. If anything here differs from the RBI's release, the release is right.