CASA Ratio explained...
What is CASA in Banking and why is it important contributor in bank's profit?
BANKING
CASA stands for Current Account and Savings Account deposits, which are low-cost funding sources for banks. These accounts form the backbone of a bank's deposit base, offering cheaper capital compared to fixed or term deposits.
Current Account Basics
Current accounts suit businesses and high-transaction users, allowing unlimited deposits and withdrawals without interest payments. They often include overdraft facilities but require higher minimum balances, making them ideal for traders handling frequent cash flows.
Savings Account Features
Savings accounts target individuals for parking surplus funds, earning modest interest (typically 2.5-4%) while limiting transactions to encourage saving. They come with lower balance requirements and basic digital access for bills or emergencies.
CASA in Banking Context
Together, CASA deposits keep bank costs low since current accounts pay zero interest and savings offer slim rates. Banks aim for high CASA shares to boost lending margins, especially in India where ratios above 40% signal financial strength.