Sensex rises over 1 pct on package for state-run banks

MUMBAI (Reuters) - The BSE Sensex and Nifty rose more than 1 percent each on Wednesday, heading for their biggest daily gain in nearly 1-1/2 weeks, as state-run banks rose after the government's plan of a comprehensive package raised hopes of faster recapitalisation.

As part of the package, New Delhi is trying to improve corporate governance and strengthen management at state-run banks, Junior Finance Minister Jayant Sinha said. It is also overhauling annual targets for public sector lenders to increase the focus on efficiency.

Gains also tracked higher global shares as some investors kept faith with expectations that, despite defaulting on an IMF loan, Greece will find a way to stay inside the currency zone.

"Greece has been put on the back burner. The government's focus to end improper lending is also helping," said G. Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.

The 30-share Sensex rose 1.05 percent, while the 50-share Nifty gained 1.15 percent, heading towards their biggest daily gain since June 22.

State-run lenders, which dominate India's banking system, led the gainers on India's plan of comprehensive package to help the ailing banks.

Stress tests carried out by the Reserve Bank of India showed that gross non-performing assets (NPAs) as a ratio of total loans could rise to 4.8 percent by September from 4.6 percent in March, before dipping to 4.7 percent by March 2016.

State Bank of India rose 2.2 percent, Bank of Baroda gained 4.8 percent and Punjab National Bank advanced 2.1 percent.

Union Bank of India rose 5.8 percent and Bank of India gained 5.5 percent.

($1 = 63.7650 Indian rupees)

(Reporting by Abhishek Vishnoi; Editing by Anand Basu)