UPDATE 1-Indian lender Kotak's Q1 profit lags estimates as provisions surge

* Q1 Net profit 10.25 bln rupees vs 11.67 bln rupees estimate

* Provisions more than double from year earlier

* Bank did not avail cbank dispensation to spread bond losses (Adds details, shares)

July 19 (Reuters) - India’s Kotak Mahindra Bank Ltd posted a smaller-than-expected 12.3 percent rise in fiscal first-quarter net profit on higher provisions for treasury losses even as its bad loan ratio improved.

The lender, which is India's second-largest bank by market capitalisation and led by Asia's richest banker Uday Kotak, said here on Thursday net profit was 10.25 billion rupees ($148.84 million) in the three months ended June 30, compared with 9.13 billion rupees a year ago.

That fell short of analysts’ expectations of 11.67 billion rupees.

Total provisions more than doubled to 4.70 billion rupees from 2.04 billion rupees a year ago, as the Mumbai-based lender said it did not avail a central bank dispensation of spreading mark-to-market losses over four quarters.

The bank’s shares, valued at more than $37 billion, fell as much as 4.6 percent to a more than two-week low after the results, and were down 4.2 percent at 0822 GMT.

Loans at end-June grew 24 percent from a year earlier, while net interest income rose 15 percent. Net interest margin came in at 4.3 percent.

Private sector banks such as Kotak have expanded loans at a faster pace as record levels of bad loans have constrained the dominant state-backed lenders in Asia’s third-biggest economy. Kotak has also gained from its strong retail presence and relatively smaller exposure to the troubled sectors such as power and infrastructure.

Gross bad loans as a percentage of total loans fell to 2.17 percent at end-June from 2.22 percent in the preceding quarter and 2.58 percent a year ago.

Kotak’s stock rallied close to 30 percent in the June quarter, outperforming the NSE stock index and the Nifty Private Bank index.

Earlier in the day, Kotak’s smaller rival RBL Bank Ltd posted an about 35 percent jump in quarterly profit, buoyed by higher interest income even as its bad loan ratio remained unchanged at 1.40 percent at the end of June.

$1 = 68.8675 Indian rupees Reporting by Vishal Sridhar in Bengaluru and Devidutta Tripathy in New Delhi; Editing by Subhranshu Sahu