Mumbai: Banking stocks cheered the Reserve Bank of India's move to cut the cash reserve ratio by half a percentage point with the sectoral index gaining over 3 percent.

Pursuant to the RBI policy announcement, the BSE banking index was the largest gainer among the sectoral indices.

At 1201 hrs, the Bankex was trading up 335.79 points or 3.07 percent, compared just 1.43 percent gain the benchmark index Sensex.

Analysts said this is a good move by the central bank as after this initiative banks may reduce the interest rate to attract borrowers.

ICICI Bank, which has the highest weightage in the 14 stock banking index jumped more than 3 per cent to touch a high of 887. It was later trading at 886, up 3.29 per cent from its previous closing price on BSE.

Banking giant State Bank of India (SBI) climbed over 4.30 per cent to a high of Rs 2,024.10. It was later quoted at Rs 2,014, up 3.78 per cent from its last close on BSE.

Other major movers were HDFC Bank which was trading at 492.50, higher by 1.78 per cent, Axis Bank at 1,023.75, (up 2.71 percent), Punjab National Bank at 1,005.80 (up 4.75 percent), Bank of India at 340, (up 6.72 percent), Kotak Mahindra Bank at 493 (up 3.26 percent) and IndusInd Bank at 287 (up 1.99 percent).

RBI today cut CRR, the amount of deposits the banks are required to keep with RBI in cash, to 5.5 per cent from 6 per cent with effect from January 28, releasing 32,000 crore in the system to ease the liquidity problems.

The short-term lending rate (repo) has been kept unchanged at 8.5 percent.

All the rate sensative sectors -- capital goods, auto and real estate were trading in the green and were the major movers today, which gained 2.72 percent, 0.90 percent and 2.26 perent respectively.