Nifty Bank index rallied 5 percent on Wednesday, a day after Prime Minister Narendra Modi announced a Rs 20 lakh crore package -- nearly 10 percent of India’s GDP.

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All banks traded in the green, with ICICI Bank contributing the most gains. The stock surged as much as 8 percent to Rs 348 on the NSE.

Meanwhile, Axis Bank, Bank of Baroda and Bandhan Bank rose between 4 and 9 percent.

Further, HDFC Bank rallied over 6 percent to Rs 960 while Kotak Mahindra Bank rose about 5 percent to Rs 1,218 on the NSE. Other banks, including SBI, RBL Bank and IDFC First Bank surged between 3 and 4 percent.

On Tuesday, the Indian Banks Association submitted the proposal to the union government and the Reserve Bank of India (RBI) to set up a bad bank, senior banking officials aware of the matter told CNBC-TV18.

CNBC-TV18 had earlier reported that the IBA, after receiving comments from several banks, had firmed up the proposal to house approximately Rs 70,000-75,000 crore of bad loans at book value in the proposed bad bank.

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