RBI has been monitoring the foreign investment limit under the portfolio investment scheme (PIS) in the bank which has hit the trigger point.
"Hence, further purchases of equity shares of this company would be allowed only after obtaining prior approval of the RBI," the central bank said in a release today.
As per the data available on the BSE, Foreign Institutional Investors (FIIs) held 31.68 per cent shares in Kotak Mahindra Bank as of quarter ended March 31, 2014.
FIIs, NRIs and PIOs (Persons of Indian Origins) can invest in primary and secondary capital markets in India through Portfolio Investment Scheme (PIS).
RBI monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis.
To effectively monitor the limit, RBI has fixed cut-off points two percentage points lower than the actual ceiling.
The shares of the bank closed at Rs 960, up 2.19 per cent on the BSE.