Fresh bank sector aid cheers Russia market

MOSCOW (Reuters) - Russia's stocks rose as the Kremlin promised to pump 900 billion roubles into the country's banking system under a fresh aid package, helping the benchmark index recover some of the previous day's 19 percent slump.

State bank shares led the gains after President Dmitry Medvedev announced that the state would give key Russian banks subordinated credit totalling 950 billion roubles ($36.

State controlled retail bank Sberbank rose 8.45 percent, while state controlled VTB rose 8.7 percent.

"Of course it's helping, so much money. It's such a big liquidity injection and a big positive," said UniCredit analyst Vladimir Osakovsky said.

"It would be good if it lasts a day or two because the problems have not gone away anywhere, neither in the banking system nor in the real economy."

Medvedev's meeting with state bankers and government officials came after Russia's benchmark RTS index plunged 19 percent on Monday.

It was the worst daily showing in its 13 year history. Dealers estimated the central bank sold $5 billion during that session to prop up the rouble.

By 11:20 a.m. British time the RTS index, Russia's benchmark, was up 3.93 percent at 900.45, while the MICEX index, an indicator of more liquid rouble denominated trade, rose 4.82 percent to 788.29 points.

The rouble held at the central bank-defended 30.40 level against a euro-dollar basket on Tuesday, while overnight money market rates rose to one-week highs.