After a good ride, tide turns for low-cost CASA in September quarter

The phase of pulling in money into low-cost deposits -- current accounts and savings accounts (CASA) -- with ease is over for banks due to a turn in the interest rate cycle. For many the share of CASA in deposits either remained static or shrank in the quarter ended September 2022.

HDFC Bank, the largest bank in the private sector, saw its share of CASA deposits (as part of its total deposits) shrinking to 45.4 per cent in September 2022 from 45.8 per cent in June 2022 and 46.8 per cent a year ago.

Union Bank of India, a large public-sector bank, reported a drop in its CASA share to 35.63 per cent in September 2022 from 36.19 per cent in June 2022 and 37.16 per cent in September 2021. The case with the country’s largest lender, State Bank of India (SBI), is no different. The share of CASA dipped from 46.24 per cent in September 2021 to 45.33 per cent in June 2022.

Now banks have to struggle to get cheap money, given the high inflation, hardening policy rates, and depleting surplus money in the system.

A senior SBI official said customers had become savvy with their money and were doing a lot of groundwork to decide on investment. The bank last week increased savings interest rates by 30 basis points on deposits of Rs 10 crore and above.

Now it offers 3 per cent on such amounts, which is at par with what three private sector banks -- HDFC Bank, ICICI Bank, and Axis Bank -- are giving. Depositors have shifted part of their money from savings accounts.

A S Rajeev, managing director and chief executive, Bank of Maharashtra, said with increase in deposit rates, there had been some shift from savings accounts to term deposits. This shift is controllable and the bank will be able to sustain a 55 per cent level, helped by financial inclusion, he said.

The share of CASA saw a slight rise to 56.27 per cent in September 2022 from 56.08 per cent in June 2022 and 53.91 per cent a year ago.

Getting to incrementally increase the CASA share in the funds raised would be a tough task for bankers. On the challenge of increasing CASA, Prashant Kumar, managing director and chief executive, YES Bank, said it was difficult to give a specific number but the bank would try to improve its share.

YES Bank, in an analyst interaction, said the CASA ratio continued to improve with potential near-term headwinds to the target of 35 per cent (for FY23). It calls this an “aspirational goal”.

The CASA share was 31 per cent in September 2022, up from 30.8 per cent in June 2022 and 29.4 per cent a year ago.