On what basis DU sets their cut-off? Does it vary state by state because no one gets more than 85% in Bihar board exams?

The cut-offs are on the basis of examination and average range of results among students. If there are a high number of students getting 98% then it is possible that cut-offs will go high and DU may close cutoffs even after 3 list, of specific courses If the seats are full. For reservations category, cut-offs are less and it can be around 80-85% and it may reduce further if the number of candidates is less. It all depends upon number of seats remaining.

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