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NSE bank index fell as much as 6.6 per cent after Reserve Bank of India Governor Raghuram Rajan surprised markets in his maiden policy review on Friday by raising interest rates to ward off rising inflation.
Analysts tracking the sector say this is likely to hit growth further as RBI has chosen inflation over growth in its growth-inflation dynamics.
Meanwhile, shares in Dena Bank and Vijaya Bank fall over 5 per cent after the announcement of the stock's exclusion from the National Stock Exchange's (NSE) derivatives segment.
The NSE had said in a circular on Thursday that trading in futures and options contracts of Dena Bank and Vijaya Bank would not be available from Nov. 29.
"However, the existing unexpired contracts of expiry months September 2013, October 2013 and November 2013 would continue to be available for trading till their respective expiry and new strikes would also be introduced in the existing contract months," the exchange added.
Dena Bank drops 6.8 per cent while Vijaya Bank plunges 5.4 per cent