State Bank is the country's largest lender.

“On the back of the monetary policy announced by the RBI, we have taken the lead to cut interest rates on home loans up to Rs 30 lakh,” State Bank chairman Rajnish Kumar said in a statement.

The decreased rates are effective from Friday.

The Reserve Bank of India (RBI) on Thursday cut repo rate- the rate at which the central bank  lends money to commercial banks- by 25 basis points from 6.5 per cent to 6.25 per cent, evoking positive responses from the corporate sector.

The decisions came after the RBI's monetary policy committee (MPC) meeting, the first since Shaktikanta Das took charge as the central bank's governor.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.5 per cent.

The MPC also decided to change the monetary policy stance from calibrated tightening to neutral.

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

Das in his statement said: "It is noteworthy that the path of inflation has moved downwards significantly, and over the period of the next one year, headline inflation is expected to remain contained below or at the target of 4 per cent."

"This has opened up space for policy action. Meanwhile investment activity is recovering but supported mainly by public spending on infrastructure. The need is to strengthen private investment activity. Private consumption also needs to be buttressed. While bank credit flows have picked up and overall flows to the commercial sector have picked up, they are yet to become broad-based," he said.

Interim Finance Minister Piyush Goyal said the RBI’s decision to reduce the repo rate by 25 basis point from 6.5% to 6.25% and change of stance to ‘Neutral’ will give a boost to the economy, lead to affordable credit for small businesses, homebuyers etc. and further boost employment opportunities.