It was the top gainer on both the key indices during the day.
The company's market valuation also rose by Rs 11,524.74 crore on BSE to Rs 2,69,794.74 crore.
On the volume front, 34.17 lakh shares of the company were traded on BSE and over 4 crore shares changed hands at NSE during the day.
The bank's decision to lower the rate came two days ahead of the Reserve Banks's monetary policy review meeting and is likely to trigger rate war among peers.
SBI's savings bank account base is about Rs 9 lakh crore.
The country's largest lender will however continue to pay 4 per cent interest on savings bank accounts with deposits of above Rs 1 crore, it said in a statement.
The two-tier savings bank account interest rate comes into effect from today.
"Country’s largest PSU bank’s interest rate cut decision attracted investors to the banking stocks due to an expectation of more peers to follow the trend," said Vinod Nair, Head of Research, Geojit Financial Services Ltd.
Buying was also seen in other bank stocks, with Bank of Baroda rising 2.54 per cent, PNB (2.04 pc), ICICI Bank (2.01 pc) and Kotak Mahindra Bank (1.57 pc).
The BSE bank index gained 1.30 per cent to end at 28,386.54.