Mumbai: The country’s largest bank State Bank of India (SBI) announced a steep interest rate cut in several years on Sunday, by reducing its marginal cost of funds based lending rate (MCLR) by 90 basis points (bps) across all maturities.

With this cut, SBI has passed on benefit of 200 bps since January 2015 to customers, which is more than 175 bps reduction in the Reserve Bank of India’s (RBI) policy rate cut in the same period.

The new rates come into force from today. SBI’s one-year MCLR stands reduced to 8% from 8.9%, while the rate on overnight loans is now 7.75%, against 8.65%.

Banks are flush with funds after the note ban, with Rs 12.4 lakh crore having been deposited with banks till December 10. SBI chairman Arundhati Bhattacharya said, “There is huge liquidity with the bank due to the large flow of deposits. This has driven us to reduce lending rates, which, hopefully, will kickstart credit demand and growth.”

Two other public sector lenders – Punjab National Bank (PNB) and Union Bank of India – also slashed their MCLR rates on Sunday. Delhi-based PNB cut lending rates by 70 bps, while Mumbai-based Union Bank reduced its MCLR by 65 bps to 90 bps across different tenors.