Major Setback for Customers: RBI Cancels License of Color Merchants Co-operative Bank

RBI Steps In to Safeguard Depositor Interests as Bank Fails to Meet Capital Norms

In a significant move, the Reserve Bank of India (RBI) has cancelled the banking license of Color Merchants Co-operative Bank, an Ahmedabad-based cooperative bank, citing insufficient capital and poor earning prospects. The cancellation came into effect from the close of business on April 16, 2025.

The central bank stated that allowing the bank to continue operations would be detrimental to the interests of depositors, and the bank’s current financial position made it incapable of meeting its liabilities.

Why RBI Cancelled the License

According to the official statement, the Color Merchants Co-operative Bank:

• Failed to maintain adequate capital and earning potential

• Was non-compliant with several provisions of the Banking Regulation Act

• Could not pay its depositors in full due to financial instability

The RBI concluded that the continuation of the bank’s operations would adversely impact public interest, prompting regulatory intervention.

Depositor Protection: Insurance Payouts Up to ₹5 Lakh

To protect depositors, the Registrar of Co-operative Societies, Gujarat, has been requested to initiate bank closure procedures and appoint a liquidator. Following the liquidation process:

• Each depositor is entitled to receive up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.

• The RBI stated that about 98.51% of depositors are expected to receive the full value of their deposits.

• As of March 31, 2024, the DICGC has already disbursed ₹13.94 crore to eligible depositors.

What Happens Next?

With the license revoked, Color Merchants Co-operative Bank will cease all banking operations, including accepting and repaying deposits. The RBI has reiterated that continuing the bank’s operations posed a serious risk to depositors and public trust in the banking system.

Customers of the bank are advised to approach the DICGC for insurance claims and stay updated through official RBI notifications and the Registrar’s announcements regarding liquidation proceedings.