Share of low-cost deposits falls as FD rates rise, banks' NIM may take hit

With RBI on monetary tightening path, liquidity has shrunk and interest rates have hardened, forcing banks to hike rates on term deposits in order to get funds for credit growth

With interest rates on term deposits rising, the accretion of low-cost deposits – CASA (current account and savings account) – is seeing moderation at banks. This may, in turn, impact their margins, going ahead.

Most banks that have announced their July-September earnings, with either flat growth or a dip in their CASA ratio during the quarter. The country’s largest lender State Bank of India (SBI) saw its CASA ratio decline to 44.63 per cent in Q2FY23 from 46.24 per cent in the year-ago period. Similarly, the ratio at HDFC Bank, the country’s largest private sector lender fell to 45.4 per