Shares in India's fourth-largest private lender Yes Bank plunged more than 70 percent on Friday after the central bank seized control and imposed withdrawal limits.
Queues formed outside Yes Bank branches after the announcement late Thursday that customers can only withdraw 50,000 rupees ($678) over the next 30 days.
India has been grappling with a liquidity crunch caused by the near-collapse more than a year ago of IL&FS, one of the nation's biggest shadow banks -- finance houses responsible for significant consumer lending.
Yes Bank has been particularly badly hit as it struggles under a mountain of bad loans.
Its weakened position was "largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades", the Reserve Bank of India, said Thursday.
"The bank has also experienced serious governance issues and practices in the recent years, which have led to a steady decline of the bank," it added but said there was "no need to panic".
"It's not clear at the moment and that is making some people panic a bit. Even I am at the moment," Devika, a student and Yes Bank account holder, told AFP as she queued to withdraw money in New Delhi.
By midday in Mumbai (0630 GMT), Yes Bank shares had recovered slightly but were still down 61 percent at 14.30 rupees.