The BSE Sensex is up 0.97 percent while the NSE Nifty gains 0.89 percent.
The Indian government on Tuesday is expected to seek a vote in the lower house of parliament on easing voting rules of shareholders in banks to attract foreign investment and separately, allow the central bank more powers.
The government on Monday passed a finance bill in the lower house of parliament which makes recovery of bad loans by banks easier.
Dealers are taking positions in state-run banks after the government's move to push through banking reforms, citing cheap valuations and hopes of NPA recovery.
Bank shares leading gains: ICICI Bank is up 2.4 percent, Punjab National Bank gains 1 percent while Bank of India rises 1.4 percent.