UPDATE 1-Fresh bank sector aid cheers Russia market

MOSCOW Oct 7 (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 ($36.69 billion) [ID:nL7689806] as trade resumed after a 2-1/2 hour delay imposed by regulators.

State controlled retail bank Sberbank SBER03.MM rose 8.45 percent, while state controlled VTB (VTBR.MM) rose 8.7 percent.

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

"It would be good if it lasts a day or two becase 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.

Russia's markets watchdog delayed the trade opening until 1300 local time (0900 GMT) from the usual 1030, and tightened trading limits in case of sharp future moves [ID:nL733411].

By 1020 GMT 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 RUBASKET=MCX, while overnight money market rates rose to one-week highs MOSPRIMEOND=.

Deputy economy minister Andrei Klepach said the measures would focus on ensuring that banks pass on liquidity to Russian companies while minimising the impact on inflation.

Russian companies are struggling to refinance foreign debt as the credit crunch has made borrowing abroad virtually impossible.

Moscow's bourses have been hit by the loss of confidence in the global financial sector and broad risk aversion, which added to an already Russia-negative sentiment in the wake of the military conflict with Georgia and the subsequent souring of relations with the West.

"We are going to have to see the whole world get more comfortable ... before Russia can recover," said Ronald Smith, head of research at Alfa Bank.

"They (Russian authorities) have done pretty much everything they can at this point ... We know that they are in crisis management mode, they are proactive and they have a lot of resources they can throw at internal problems. But most of the problem at the moment is external to Russia." (Reporting by Polina Vorobieva and Toni Vorobyova; Editing by Hans Peters)