What is CASA
Definition: CASA stands for Current Account and Savings Account which is mostly used in West Asia and South-east Asia. CASA deposit is the amount of money that gets deposited in the current and savings accounts of bank customers. It is the cheapest and major source of funds for banks. The savings accounts portion pays more interest compared to current accounts.
Description: Banks offer mainly two types of accounts. These could be term deposits- like fixed or recurring deposits or non-term deposits - like current or savings accounts.
A term deposit is valid for a fixed period of time and in return the bank pays interest at a fixed rate with the condition that you do not touch the money in the interim. For example, you put in Rs 10,000 in a fixed deposit for a period of seven years and the bank pays you an interest at the rate of 12 per cent per annum.
On the other hand, current and savings accounts are used for daily operations and are valid as long as the customer wants them to be. They have lower interest rates than term deposits depending on the bankĄ¯s terms and conditions. For example, in an urban area ICICI Bank pays 4.0 per cent interest on a savings account with cheque book on a minimum balance of Rs 10,000.
Since interest rates are lower than term deposits, CASA is a cheaper source of funds for banks. For this reason, financial experts also look at CASA ratio to understand a bankĄ¯s financial health, as the same reflects the bankĄ¯s capacity to raise money with lower borrowing costs.
Description: Banks offer mainly two types of accounts. These could be term deposits- like fixed or recurring deposits or non-term deposits - like current or savings accounts.
A term deposit is valid for a fixed period of time and in return the bank pays interest at a fixed rate with the condition that you do not touch the money in the interim. For example, you put in Rs 10,000 in a fixed deposit for a period of seven years and the bank pays you an interest at the rate of 12 per cent per annum.
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On the other hand, current and savings accounts are used for daily operations and are valid as long as the customer wants them to be. They have lower interest rates than term deposits depending on the bankĄ¯s terms and conditions. For example, in an urban area ICICI Bank pays 4.0 per cent interest on a savings account with cheque book on a minimum balance of Rs 10,000.
Since interest rates are lower than term deposits, CASA is a cheaper source of funds for banks. For this reason, financial experts also look at CASA ratio to understand a bankĄ¯s financial health, as the same reflects the bankĄ¯s capacity to raise money with lower borrowing costs.