As of 10:43 am, the Sensex traded 190 points or 0.5 per cent higher at 37,684 and the NSE Nifty 50 Index was up 0.6 per cent or 68 points at 11,125.

The RBI's move comes days after the government announced a range of measures, including an immediate injection of Rs 70,000 crore into state-run banks, instead of spreading it over the year ending March 2020 as announced in Budget, to push growth in the sector.

"More money coming to the government either for meeting the budgetary target or for extra expenditure has been seen positively as government security (GSec) yields have already shown signs of dipping to 6.44 per cent for GSec (10 year) against yesterday's closing of 6.51 per cent," CARE Ratings said in a note.

Nine of 11 sector gauges compiled by National Stock Exchange were trading higher led by the Nifty PSU Bank Index's 3.4 per cent gain.

Nifty Metal, Auto, FMCG, Private Bank and Bank sector gauges also rose between 0.9 and 1.8 per cent each.

On the other hand, Nifty Information Technology index was top loser, down 1.2 per cent.

Mid- and small-cap shares were outperforming their larger peers as the Nifty Midcap 100 and Nifty Smallcap 100 indexes rose 1 and 1.7 per cent each respectively.

Britannia Industries and Tata Motors were among top gainer in the Nifty 50 basket of shares. Both the stocks rose over 5 per cent. UltraTech Cement, UPL, IndusInd Bank, Yes Bank, Larsen & Toubro, GAIL India, Tata Steel, Coal India, Eicher Motors and State Bank of India also rose between 1.75 and 4.5 per cent.

On the flipside, Bharti Airtel, Infosys, Tech Mahindra, Tata Consultancy Services, Cipla, HCL Technologies and Kotak Mahindra Bank were among the laggards.