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- NEXT DEFINITIONCash Reserve RatioCash Reserve Ratio is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves with the central bank.Read More
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 bank’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 bank’s financial health, as the same reflects the bank’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.
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 bank’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 bank’s financial health, as the same reflects the bank’s capacity to raise money with lower borrowing costs.
- PREV DEFINITION
- NEXT DEFINITIONCash Reserve RatioCash Reserve Ratio is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves with the central bank.Read More
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Is most of the repricing in Canara Bank over? Satyanarayana Raju answersCanara Bank is focusing on alternative funding sources to reduce dependence on costly deposits. They are also expanding their deposits and launching new products in the CASA segment to boost growth. The bank has seen significant increases in savings accounts and has improved yields on advances. There is cautious optimism regarding future growth in various segments.
Is most of the repricing in Canara Bank over? Satyanarayana Raju answersCanara Bank is focusing on alternative funding sources to reduce dependence on costly deposits. They are also expanding their deposits and launching new products in the CASA segment to boost growth. The bank has seen significant increases in savings accounts and has improved yields on advances. There is cautious optimism regarding future growth in various segments.
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Sumit Agrawal on how will rate cuts affect banking sector's margins and CASA ratios???Let us say something or deposits maturing in, let us say, six to nine months and if you look at share of those deposits, probably private sector banks scores well here because they have slightly higher tenure of deposits which are maturing in the six to nine months and therefore, that can get repriced almost in a matter of two to three quarters which will help in lowering down the incremental cost of deposits.
Three crore accounts to be opened under JanDhan in FY25: FM SitharamanA large number of normal saving bank accounts are also opened by banks. New measures like e-KYC and video KYC have made the account opening process paper-less, eliminating the need to visit a branch or banking correspondent for opening of bank account.
Bandhan Bank introduces new savings product 'avni' exclusively for womenBandhan Bank has introduced 'avni', a savings product specifically for women, aiming to increase current and savings account deposits. Targeted at affluent women, it offers benefits like free airport lounge access and personal insurance. A loyalty program has also been launched. The bank’s deposits grew by 23% year-on-year but CASA growth was slower at 14%.
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