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Indian shares fell more than 1% in volatile trading on Monday, dragged by a selloff in financial stocks, while the collapse of Silicon Valley Bank weakened sentiment.

The S&P BSE Sensex dropped 1.4% to 58,309.51, as of 14:16 p.m. IST.

Meanwhile, U.S. authorities on Sunday announced plans to limit the fallout from the collapse of Silicon Valley Bank (SVB), easing fears of contagion.

"Selling in the banking sector In India is not directly linked (with SVB events) but as of now one can say it is more of a sentimental impact," said Anita Gandhi, director at Arihant Capital Markets.

Indian analysts don't expect a ripple effect of the SVB crisis on the domestic financial system.

The SVB crisis has near zero impact on Indian banking, V. K. Vijayakumar, chief investment strategist at Geojit Financial Services, said, adding that it is unlikely to rattle markets for long.

Bank stocks dropped 2.1%, while public sector banks fell 2.3%. Auto companies lost 2.2%.

IndusInd Bank Ltd was the top loser in Nifty as well among banking stocks, sliding 7.6%, after analysts said the RBI's approval of the tenure of re-appointment of the private lender's CEO came in below its proposed period. 

On the flipside, Indian IT services provider Tech Mahindra jumped over 10% after it named an Infosys veteran Mohit Joshi as the new chief executive officer after incumbent C.P. Gurnani retires in December.

Meanwhile, Indian investors await retail inflation data, which likely eased to 6.35% in February, though above the Reserve Bank of India's upper threshold for a second straight month, a Reuters poll of 43 economists showed.

Shares of Yes Bank Ltd fell as much as 13% after the company said its lock in period of three years as a part of the lender's restructuring ended today.