The government would likely provide the Reserve Bank of India with more power and flexibility to deal with bad loans, the Times of India reported. (http://bit.ly/2q0WxXq)

The broader NSE index was up 0.35 percent as of 0559 GMT, after earlier rising to as much as 9,361.40 points, about 6 points away from surpassing its previous record high touched on April 27.

The benchmark BSE index was 0.56 percent higher at 30,063.64.

"If the government has come out with a meaningful step which will help banks speed up the process of resolution of stressed assets that will be a significant boost for the profitability of corporate banks," said Shibani Kurian, senior vice president and head of equity research at Kotak Mutual Fund.

The NSE Bank index rose as much as 1.42 percent to an all-time high.

Bank of Baroda, State Bank of India and Canara Bank gained more than 2.5 percent each.

ICICI Bank was up 8.9 percent after the lender said it expected additions to stressed assets to be significantly lower this financial year, although it posted weaker-than-expected earnings.

Steel makers rose after the cabinet on Wednesday approved a proposal to make the use of local steel mandatory for government's infrastructure projects, aimed at boosting the sales of local companies.

Jindal Steel & Power, JSW Steel and Steel Authority of India Ltd rose more than 2 percent each. (Reporting by Samantha Kareen Nair in Bengaluru; Editing by Biju Dwarakanath)