Mumbai, Jan 18 (IANS): Banking stocks on Thursday zoomed following reports that the government may allow 100 per cent foreign direct investment (FDI) in private sector banks.

The S&P BSE banking index surged by 1.64 per cent -- almost 500 points higher -- with stocks of major private banks in the lead.

Around 1.30 p.m., stocks of Yes Bank traded higher by 2.99 per cent, followed by HDFC Bank (up 2.79 per cent), IndusInd Bank (up 2.01 per cent), ICICI Bank (up 1.84 per cent), Kotak Bank (up 1.28 per cent) and Axis Bank (up 0.47 per cent).

State-run State Bank of India's shares traded higher by 0.88 per cent while those of Bank of Baroda fell by 0.12 per cent and Punjab National Bank dipped by 0.37 per cent.

On the National Stock Exchange, the Nifty Bank index traded higher by 1.83 per cent.

The Nifty Private Bank index edged higher by 1.85 per cent and the Nifty Public Sector Bank index by 0.21 per cent.

Reports on Wednesday said the government may allow 100 percent foreign direct investment in private banks and also consider increasing the permissible limit for FDI in public sector banks to 49 per cent from the current 20 per cent.