Manual:$wgBlockDisablesLogin

Details
If set to "true", blocked users will no longer be allowed to login.

Note
When using this with a public wiki allowing to edit via IP addresses, the effect of logging out blocked users may actually be adverse; unless the user's IP address is also blocked (e.g. autoblock), logging the user out will again allow reading and editing, just as for anonymous visitors.

Alternative
An alternative to this setting might be using $wgAutopromote with  to create a group that revokes certain rights.