The State Bank of India on Sunday reduced its marginal cost of funds rate by 0.9% across all maturities. The new rates will be in effect from January 1, 2017. The step would make home, auto, personal and other loans cheaper.

Maturities in the bracket of overnight to three-year tenures have recorded an increase in deposits prompting the reduction of the lending rate. SBI chairperson Arundathi Bhattacharya said the spike in deposits has enabled an increased liquidity. “This has driven us to reduce the lending rate which will kickstart credit demand and growth,” she said. The interest rate on deposits will also be reconsidered soon, Bhattacharya said.

The bank reduced the overnight marginal cost of funds-based lending rate from 7.75% to 8.65% while its three-year marginal cost of funds lending rate has been cut from 8.15% to 9.05%, Business Standard reported. The bank has reduced its benchmark lending rate by 200 basis points in the past two year.

The move follows Prime Minister Narendra Modi’s New Year’s Eve appeal to banks asking them to prioritise the lower and middle classes. Banks have received an estimated Rs 14.9 lakh crore in old Rs 500 and Rs 1,000 currency notes since November 8, when the government launched its demonetisation drive against black money and corruption.