Mumbai, April 2 (IANS) Indian shares crashed Monday and fell by more than 3 percent, following an unexpected hike of short-term interest by the central bank to contain inflation.

After market hours Friday, the Reserve Bank of India had increased its short-term lending rates to banks by 25 basis points.

By noon Monday, the key 30-share sensitive index of the Bombay Stock Exchange (BSE) was down 416.14 points or 3.18 percent at 12,655.96.

Similarly, the broader 50-issue National Stock Exchange (NSE) index, Nifty was down 134.3 points or 3.15 percent at 3,687.25.

By noon, shares in top public sector lender state-owned State Bank of India were down 5.75 percent trading at Rs.935.80; shares in top private lender ICICI Bank, which Saturday raised its benchmark lending rate by 100 basis points to 15.75 percent effective from April 1, were down 4.65 percent trading at Rs.813.40, and the second largest private lender HDFC Bank Ltd's shares were down 4.15 percent trading at Rs.910.00.

Other index shares that were trading in the red included top multi-utility vehicle maker Tata Motors, down 6.85 percent trading at Rs.677.90, followed by top two-wheeler and three-wheeler maker Bajaj Auto Ltd., down 6.12 percent trading at Rs.2,277.10. Top carmaker Maruti Udyog was down 5.15 percent trading at Rs.777.45.

"RBI's rate decision had a negative impact on the market early Monday. It took them by surprise because they were some kind of market stability at least for the next few months. But I think the market will level at 12,300 mark soon," said analyst Jayash Shroff.