MUMBAI (Reuters) – The BSE Sensex and Nifty surged nearly 2 percent on Monday, recovering from recent losses with the 30-share index posting its biggest single-day gain in two and a half months as lenders such as State Bank of India rose after the Reserve Bank of India (RBI) relaxed provisioning rules against bad loans.

The RBI on Monday said it would allow banks to set aside up to 50 percent of floating provisions from 33 percent. Floating provisions are the amount that banks set aside that are above the mandatory provisioning requirement against bad loans established by the central bank.

The announcement late in the session spurred additional gains in shares, helping the 50-share Nifty snap an eight-session losing streak in which the gauge lost 4.4 percent, compared with a 1.5 percent gain in the MSCI Asia Pacific Ex Japan index.

The Nifty closed up 1.81 percent at 8,492.30, its biggest single-day gain since Feb. 27. The BSE Sensex ended higher 1.88 percent at 27,975.86, its best daily gain since Jan. 15.

The general sentiment was bullish as markets across the region were trading higher with China stocks nearing a seven-year peak on hopes for more infrastructure spending and policy stimulus, while oil prices suffered further from excess supply.

Lenders rose with the Bank Nifty up 1.76 percent. State Bank of India added 1.6 percent, while HDFC Bank (HDBK.NS) closed up 2.2 percent.

Recent underperformers also gained. Bharat Heavy Electricals Ltd (BHEL.NS), which fell 5.3 percent last week, rose 2.6 percent, while NMDC Ltd (NMDC.NS) added 3.4 percent.

(Reporting by Indulal PM; Editing by Subhranshu Sahu)