 "Banks continue to struggle for CASA share in Q2, challenge to remain in H2")
Commercial banks’ share of current accounts and savings accounts (CASA) in deposits eroded in the second quarter ended September 2023 as customers moved money to term deposits, which give higher interest rates.
According to CARE Ratings, the share of CASA in commercial banks was 41.6 per cent as of June 30, 2023. The share was 44.1 per cent as of September 2022. The decline in the ratio has come as banks focused on term deposits.
CASA are used for daily operations by businesses, households, or individuals.
Generally banks do not pay interest on money in current accounts. On saving accounts the rates are low. CASA is a relatively cheap source of funds for banks. The higher the share of CASA in deposits, the lower is the cost of funds for banks. This helps them maintain better margins and gives them the room to offer viable lending rates in competitive markets.
Senior bankers said the share of CASA continued to decline even as the system entered the third quarter this financial year.
Getting money into savings deposits has become challenging and will remain so in the coming quarters as banks battle for resources to meet the demand for credit.
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While a shift in money to term deposits due to higher interest rates remains the main reason, an increase in consumption, which is paid out of money in savings accounts, is a reason for challenges, said a senior State Bank of India executive.
Public-sector banks, which have extensive branch networks in semi-urban and rural areas, have an edge over their private counterparts in garnering CASA deposits and generally refrain from tweaking savings deposit rates. On the contrary, private banks and small finance banks have been active in offering higher interest rates for savings accounts. Large sums in savings accounts attract higher interest rates.
An analyst with a ratings agency said there was still a downside to CASA, given that some banks were offering even 8 per cent per annum on savings accounts. No bank wants to lock in liabilities (deposits) at high fixed deposit rates.
DCB Bank, Mumbai-based small private lender, offers 8 per cent a year on the balance between Rs 10 lakh and less than Rs 2 crore.